Report of the Joint Committee on Finance, Public
Expenditure and Reform visit to the Budget
Committee and European Affairs Committee of the
Bundestag
25-27 January 2012
1.
Introduction.
A delegation from the Joint Committee on Finance, Public Expenditure and
Reform visited the Budget Committee and the European Affairs Committee
of the Bundestag.
Sanction was granted for 5 members to attend; a
further three members, who covered their own costs, also travelled. The
delegation was led by Deputy Alex White (Chairman of the Joint
Committee) and comprised Deputy Liam Twomey (vice-Chairman);
Deputy Michael McGrath; Deputy Pearse Doherty and Deputy Richard
Boyd-Barrett. Accompanying the delegation, paying their own costs, were
Deputy Peter Mathews, Deputy Kieran O’Donnell and Senator Michael
D’Arcy. Mr Ronan Lenihan, Clerk to the Joint Committee accompanied the
delegation. The programme for the visit is at appendix 1
2.
Briefing at Embassy
Ambassador Dan Mulhall welcomed the delegation and gave the members
an overview on the perceptions of Ireland in Germany. The ambassador
advised the delegation that the Mission in Berlin was one which explained
Ireland to Germany and Germany to Irish policy makers. The Ambassador
advised that brands such as ‘Kerrygold’ are very well known in Germany,
but what was needed was to present Ireland in the ‘round’ and build on
the positive feelings that exist for the country, particularly Irish culture
and music. Germany is now the 4th most important market for Ireland.
One of the prime areas within the Mission of achieving this goal was the
use of cultural events.
The Ambassador briefed members on the various meetings that had been
arranged and the political scene that exists at both the Federal level and
within the Landers (there are 16 Landers which are partly sovereign
1
constituent states of the Federal Republic of Germany).
Following the
September 2009 General Election, the Christian Democratic Union (CDU),
its Bavarian sister party, the Christian Social Union (CSU), and the Free
Democratic Party (FDP) formed a new centre-right government with
Angela Merkel continuing as Chancellor. The 17th German Bundestag has
620 Members, eleven more than in the last electoral term. The largest
parliamentary group is the CDU/CSU with 237 seats, of which 22 are socalled ‘overhang mandates’, ahead of the SPD with 146 seats, the FDP
with 93 seats, the Left Party with 76 seats and Alliance 90/The Greens
with 68 seats.1
In the move to the Euro the German citizens were assured that there
would be no bail-outs. This has not proved to be the reality, so there was
strong grassroots opposition particularly from within the government
parties which causes political problems for Chancellor Merkel and the
Government.
The Chancellor and Government do not want to rely on
opposition votes
as such a scenario implies
the
inability
of the
Government to secure a majority from within its ranks.
3.
Meeting
with
Berlin
based
Irish
business
community
representatives.
Following the briefing by the Ambassador the delegation met with Berlin
based Irish business community representatives. The discussion ranged
over several themes and the following points were noted:

German exposure
to
personal debt
is
low as
there
is no
encouragement to take out credit as there was in Ireland – it was
illustrative to note that only 14% of Berliners own their own house
and credit card ownership is rare.

For development (property and business) the route taken is to seek
investors rather then finance through bank debt. In this regard the
delegation was advised that proposals to banks for funding of
developments are looked at very stringently. The level of funding
1
http://www.bundestag.de/htdocs_e/bundestag/members17/index.html
2
advanced by a bank for a project is based only on what the rent
yield will support.

The German bureaucratic system of permissions for property
development is complex when compared to Ireland, but not
insurmountable.

There is a need for a greater presence on the ground in regard to
trade shows. Ireland has a green image in regard to food
production and this is at the premium end of the market which
gives higher returns.
A general point was raised in regard to the numbers of Irish who are
working in Germany. It was noted, particularly in regard to construction
trades, that during the boom Ireland gained a world class reputation and
became world leaders in areas such as civil engineering and architecture
and those who have these skills should be able to gain employment
around the world but were not doing so due to a lack of language skills. It
was suggested that in order to address this issue and not lose the worldleader status gained during the boom Government policy in regard to
retraining should not be for re-skilling, but be concentrated on language
training.
Those with expert construction skills could find work if given
language training and most of the business community present indicated
in strong terms that the ability to employ more Irish on projects in
German was down to language skills.
A list of the participants at the event is set out in appendix 2
4.
Working Breakfast with the German-Irish Parliamentary
Friendship Group
Established in 1987, the German-Irish Parliamentary Friendship Group is
currently chaired by Dr. Lukrezia Jochimsen, who represents the Left
Party (a former TV journalist, Ms Jochimsen was a correspondent in
London for a number of years, during which time she did extensive
reporting
from
Northern
Ireland).
The
German-Irish
Friendship Group has fifteen active members.
Parliamentary
The last visit of the group
to Ireland took place in October 2008 at the invitation of the then Ceann
Comhairle.
The Chairman, Deputy White, thanked Dr. Jochimsen for
3
meeting the delegation and commented that it was important for
parliamentarians to have a joint interactive space and that an important
element of the visit was to appraise German parliamentarians as to the
how the economic and Euro crisis was affecting Irish citizens and that by
such meetings we strengthen our bi-lateral relationships. In this regard
the Chairman stated that while Ireland was fulfilling its obligations under
the assistance package the full picture needed to be given. Deputy BoydBarrett noted that it was an imperative that it be understood by all that
Ireland cannot spend what it does not have, however, the key to
emerging from the economic crisis was investment which was now down
some 70% and investment is a prerequisite for growth. Deputy O’Donnell
raised the matter of Ireland’s corporate tax rate and how this compared to
the effective corporate tax rate in other EU member States, particularly
France. A general discussion ensued in regard to how the Fiscal Compact
could shape a clear path for the recovery of the Euro on which point the
Chairman, in his concluding remarks, noted that if the rules being
proposed as part of the Compact were in place since the establishment of
the Euro Ireland would not have been in breach as the economic crisis in
Ireland was primarily down to the banks.
5.
Meeting and Working Lunch with Budgetary Committee
Ms. Petra Merkel, SDP and Chair of the Budget Committee opened the
meeting by remarking that the Committee had voted by a large majority
in favour of providing support for Ireland in 2010.
The Committee had
taken note and been impressed by recent events in Ireland; including,
most recently, the Troika report for the third quarter of 2011.
The
members of the Budget Committee were looking forward to hearing more
about the situation in Ireland as well as views on the ESM and Fiscal
Compact. A list of the participants is at appendix 3.
The Chairman, Deputy White, in responding, recognised the solidarity
which had been shown towards Ireland in the recent period. He went on
to speak about the current mood in Ireland, highlighting the extent of the
cuts and the impact these had had on the Irish people.
The Chairman
noted that while it was true that Ireland was fulfilling its obligations under
4
the assistance package, this did not give the full picture. The Chairman
expressed support for fiscal discipline but noted that this alone was not
sufficient.
It is necessary to do more and indicated that it will be
necessary to tackle the issue of Irish bank debt.
Following Deputy White’s introductory remarks, all of the members of the
Irish delegation intervened individually.
Deputy Doherty spoke about the
importance of addressing Irish bank debt, noting that the situation in
Ireland and in the global economy has changed significantly since the
agreement was signed with the troika and that the bank debt which had
been socialised was a direct result of European policies.
He expressed
concern regarding the fiscal compact and raised the matter that people in
Ireland had been very upset about the leak of Irish budget information.
Deputy O’Donnell also raised the issue of Irish bank debt and advised that
the fiscal side of the economy had stabilised, but that bank debt was like
a second large mortgage hanging over Ireland.
He hoped that the
budget Committee might be able to support Ireland in seeking to
restructure part of our debt.
Deputy McGrath noted that Europe needs a success story and that Ireland
represents the best prospect of providing that success story. The Deputy
emphasised that Ireland is meeting all its obligations but hoped that the
Budget Committee might be able to support Ireland in dealing with the
Anglo-Irish Bank Promissory Notes. While expressing respect for German
parliamentary procedures, the Deputy expressed concern regarding the
budget leak.
Deputy Boyd Barrett emphasised that the low paid and unemployed in
Ireland were suffering enormously. The Deputy advised that Ireland had
been a poster boy for the economic boom and was cheered on by all. The
Deputy noted that everybody accepts that you can not spend more than
you generate but in order to generate you must invest and that in Ireland
investment had now has fallen by 70% from that at the peak. Without
investment Ireland will fall into a debt/austerity downward spiral which
5
would eventually lead to default. The Deputy expressed his opposition to
the fiscal compact, adding that if put to referendum in Ireland there is a
good chance that it will fail as there are already many in Ireland calling for
default and this sentiment will rise unless there is debt relief and that if
Ireland defaulted, every European would suffer.
Deputy Matthews opened by stating that Ireland was not a success story
but a story of stamina and survival. The Deputy spoke about the level of
Irish bank debt and also highlighted the high level of Irish private debt
and called for a write down of Irish debt. The Deputy advised the Budget
Committee members that if private and business debts were included in
the calculations the situation in Ireland could be seen as worse than in
Greece.
Deputy Twomey noted to the Budget Committee members present that
the delegation represented diverse views. The Deputy also drew attention
to the leak of budget information and commented that some good may
come of it as it may lead to more open debate on budgets in Ireland. The
Deputy stressed that he did not wish the members of the Budget
Committee to take a negative sentiment away from the meeting; Ireland
had every intention of repaying its debt and there is good sentiment on
the financial markets at the action taken and being taken by Ireland and
this will not be thrown away and in this regard he drew the attention to
Wednesday’s bond sale by the NTMA.
Opening discussion at the working lunch, The Chairman, Deputy White,
took the opportunity to outline the Government’s position. The Chairman
stated that the Government had a huge majority in parliament and that it
had no intention of defaulting on its debt or its responsibilities. He also
noted that the Government is currently negotiating with the Troika on how
to deal with a block of Irish debt in relation to the Anglo Irish Bank
promissory notes.
He concluded by stating that he wanted to make it
very clear that it is not a majority viewpoint that Ireland is in a worse
position than Greece.
6
The German delegation responded individually to the points which had
been made by the Irish side.
Chairperson Merkel acknowledged the
concerns that had been raised about the leak of budget information. She
stated, however, that the information had been given limited circulation
within their Committee and they believed that the leak had actually come
from the European Affairs Committee.
Norbert Barthe, (CDU) noted, from the perspective of the German Budget
Committee, that Ireland’s programme was running well and he had been
interested to hear that some of the Irish members judged this differently.
He reiterated, however, that from the perspective of the Budget
Committee it was working well.
He continued by noting that Germany
wants to keep Europe together and any impression that they were not
interested in solidarity was wrong. Solidity and solidarity were two sides
of the same coin. Throwing more and more money at the effects of the
crisis won’t help. It is also necessary to deal with the root causes. He
noted that Germany is also trying to achieve a balanced budget and
concluded by making clear that he would not compare Ireland and Greece.
Greece is different, it is a special case.
Also speaking for the CDU, Klaus–Peter Willisch stated that while he was
glad to see everybody working together, he was opposed to risky rescue
package policies.
The current situation means that the German
parliament is left debating social affairs in Greece or corporation tax in
Ireland.
When the Euro was introduced, the German Government had
promised no bail outs.
Germany already experiences this problem
internally as some of its states are in a poor financial situation. If German
creditworthiness continues to be strained it will in the end be weakened so
much that it will be useless.
He added that Ireland was clearly
fundamentally different to Portugal or Greece, its problem was its banks.
If Ireland could be compared with anybody, it is Iceland - huge agriculture
and huge banks. Concluding, he noted also that there was a feeling that
Ireland’s corporation tax rate had taken investment away from Germany.
This was a domestic issue.
Voters asked German politicians, why they
had to work until age 67 and pay high taxes, just so that those taxes
7
could be used to help Ireland whose own low tax policies had taken
investment away from Germany.
Lothar Binding (SPD) spoke about the wide spread recognition and
admiration for what is being done in Ireland. He also argued, however,
that attempts to find a solution in Europe are not tackling the root causes
of the crisis. His colleague Bettina Hagedorn (SPD) voiced concerns that
the European project is losing acceptance among European citizens. Far
right parties are becoming stronger in some countries. She noted that it
was important to look at how Irish people react to what is happening at
political level. Concluding, she noted that the fiscal compact alone would
not be sufficient. People need a light at the end of the tunnel. This is a
missed opportunity to put binding economic cooperation in place.
The Green Party representative, Tobias Lindner, noted that when voters
complain about bailing out Greece, he always points to Ireland as a
positive example. It is necessary to tackle long term issues but it is also
necessary to deal with short term resource needs. Competitiveness must
also be improved. Germany is proud to export a lot and they don’t want
to change this. At the same time, it is clear that as long as Germany has
a surplus, somebody has a deficit.
Summing up Chairperson Merkel detailed the reform process which had
been implemented in Germany over the last twenty years.
She added
that it was dangerous to just keep cutting but added that Keynesian
principles had to apply in good times as well as in bad. In good times, it
is necessary to put money aside. She also noted that Germany had found
the debt brake to be a very useful tool.
Responding the Chairman Deputy White expressed appreciation of the
reform process in Germany. He noted, however, that while some labour
market
reforms
had
been
introduced
under
the
Irish
assistance
programme, these were not particularly extensive. This reflects the fact
that they are not needed in the Irish economy which already has a flexible
labour
market.
Referring
back
to
the
comments
by
the
CDU
8
representatives, he noted that the Irish Government had also made a pact
with the Irish people when the Euro was introduced and that pact did not
involve being drawn into a vortex of debt.
He quoted the German
philosopher Habermas speaking about “competing resentments in Europe”
- Irish resentment of having to pay for the banks; German resentment
about bailing out others.
It is necessary to break through these
resentments and engage with one another. He went on to speak about
the fiscal compact, noting that the case for fiscal discipline was well made
and accepted. He added, however, that he could speak for everybody in
the delegation in stating that fiscal discipline is necessary but not
sufficient. He also noted that even if a debt brake had been in place, it
would not have helped the situation in Ireland.
On the question of a
referendum, he emphasised that the Government’s position is that if it is
legally necessary a referendum will be held, if it is not, it won’t.
In some brief remarks, Deputy Doherty expressed Sinn Féin’s opposition
to the fiscal compact and noted that they would challenge a decision by
the Government not to hold a referendum in the Supreme Court. He also
raised the link which Germany has introduced between the ESM and the
Fiscal Compact, describing it as not legally enforceable and a form of
bullying. Deputy Boyd-Barrett noted that Ireland could not develop in a
rational way while seeking to pay off the gambling debts of the financial
sector. Some Irish people already think that we should default and some
think that we will do so anyway.
It will be a problem for Germany if
Ireland defaults.
Deputy McGrath responded to a question on the Financial Transaction Tax,
stating that he supported it in principle but it should be introduced at a
global level.
If introduced at the level of the Euro zone 17 without the
United Kingdom and the financial sector in London then it would be very
problematic for Ireland. Deputy O’Donnell spoke about the importance of
the corporation tax rate for Ireland, noting that it brought investment to
Europe and this was of benefit to all.
9
Concluding the working lunch, Deputy White thanked Ms. Merkel and the
members of the Budget Committee for their time and invited a delegation
to visit Ireland as guests of the Finance Committee.
responded
positively,
thanking
the
delegation
for
their
Ms. Merkel
visit
and
expressing an interest in visiting Ireland in the future.
6.
Meeting with the European Affairs Committee
Mr Gunther Krichbaum CDU (Chair) opened with some words of welcome;
the Chairman Deputy White opened by introducing the Irish delegation
and spoke about the importance of contact between national parliaments.
A list of the participants is at appendix 4.
Several of the Irish members then made short introductory comments,
which followed the same lines as those made earlier in the day in the
meeting with the Budget Committee. The need to deal with Irish banking
debt, the importance of the corporation tax rate, the need for a success
story in Europe and the difficulties being experienced by ordinary Irish
people, including emigration and unemployment, were all highlighted.
Deputy Doherty criticised the role of the ECB and the Irish Central Bank
and Deputy Boyd-Barrett criticised the fiscal compact, arguing that if
there is a referendum in Ireland, there is a good chance that it will be lost.
Responding Mr. Krichbaum spoke about the need to regain the trust of the
markets, it is necessary to become more competitive and ensure
diversified economics. Ms Gabriele Molitor FDP (Liberals) argued that we
are living in a globalised world and it is important to understand the need
to reform.
This is essential.
For his part, Mr. Alois Karl (CDU) spoke
about the fact that there had been excesses in Ireland and that the roots
of the disaster lay in Ireland and not in Europe.
He noted that as a
politician, he was repeatedly asked by Germans why they had to pay for
Ireland or for Greece. At the same he also emphasised that Ireland is a
good partner in Europe and a good partner for Germany.
Deputy Twomey in reply stressed that Ireland was not coming to Europe
with a begging bowl.
There were different views in the delegation but
10
Ireland is an open and competitive economy which could react quickly.
Deputy Matthews intervened to make many of the same points he raised
during the meeting with the budgetary committee, stressing in particular
that in his view the current crisis is a crisis of the global financial system.
He also criticised the role and exposure of German banks and drew
attention to the contribution the London Debt Agreement of 19532 made
to the German recovery.
Responding Mr. Krichbaum spoke about the need to rebuild trust both of
the markets and of the people. He referred to the strong support in the
Bundestag for more regulation and the financial transactions tax.
Ten
years ago, Germany was criticised for its large industrial sector and small
financial sector.
Deutsche Bank is the only German “big player” in the
global financial system. Every industrial nation needs at least one player
in the financial system. He went on to criticise the UK, arguing that they
will have great difficulty in the coming years. It is necessary to have a
diversified economy.
He also criticised the ratings agencies and
highlighted the need for a European ratings agency.
Finally, he asked
about the possibility of a referendum on Ireland.
Deputy White, in response, noted that the Government’s position is that if
a referendum is legally necessary it will be held, if it is not it will not. This
may become clearer in the next week or two. He also emphasised that
the delegation wanted to deliver a positive message to their German
counterparts. Ireland is looking to the future with hope and expectation.
He also noted that work is ongoing on the Anglo-Irish Bank promissory
notes and support for this would be appreciated.
2
ECONOMIC GROWTH CENTER YALE UNIVERSITY - CENTER DISCUSSION PAPER NO. 880: FINANCIAL
VERGANGENHEITSBEWÄLTIGUNG: THE 1953 LONDON DEBT AGREEMENT Timothy W. Guinnane Yale University
January 2004 (seen at http://www.econ.yale.edu/growth_pdf/cdp880.pdf). The 1953 London Debt Agreement
settled Germany’s debts from the period between the two world wars, and allowed the country to re-establish its role
in international capital markets. The Agreement wrote-down the overall debt by about 50 percent and gave the
debtors a much longer period to repay. One interesting clause in the Agreement allowed Germany to postpone some
payments until such time as re-unification. The Agreement reflects a subtle and responsible understanding of the
problems associated with the reparations and debt crises of the 1920s and 1930s, as well as fears about the moral
hazard problems that would arise with making any part of the Agreement contingent on events Germany could
influence.
11
Deputy Doherty intervened to express his party’s opposition to the Fiscal
Compact and noted that they would take a challenge in the Supreme
Court if a referendum is not held. He expressed particular concern about
the linking of the ESM and Fiscal Compact describing it as a form of
bullying and querying its legality. Deputy Boyd Barrett stated that there
was clear agreement that you could not live beyond your means. In order
to grow and diversify its economy, however, Ireland could not be
burdened by banking debt. He also expressed his support for a financial
transactions tax and raising the corporation tax rate.
In a closing comment Deputy O’Donnell noted that the Irish economy was
already much more diversified since the collapse of the property bubble.
He went on to highlight the importance of the corporate tax regime for
Ireland, noting that the effective tax rate in France is in fact lower than in
Ireland, and expressed his hope that the delegation had increased the
German side’s understanding of the situation in Ireland.
Concluding, Mr. Krichbaum thanked the delegation for the useful
discussions. He reverted to the issue of the corporation tax rate querying
the figure for France. He said that the impression in Germany was that
the low corporation tax rate had lured a certain type of company to
Ireland and that he was pleased that this was now changing. On the fiscal
compact, Mr. Krichbaum reiterated again the need to win back trust and
send a signal of stability.
On the question of a referendum, Mr.
Krichbaum said that it was clear that this was a question that each
country had to decide for themselves.
Mr. Krichbaum noted that if the
fiscal compact failed it would really send a signal that Europe was unable
to solve its problems. In a last remark, Mr. Krichbaum noted that if, when
the European project began and a referendum on German membership
had been held in countries like the Netherlands and Belgium which
suffered so much under the Nazi regime, it would not have been passed.
Deputy White concluded the meeting by thanking Mr. Krichbaum and the
German delegation and looking forward to future dialogue.
12
7.
Meeting with the Organisation of German Taxpayers
The German Taxpayers Federation is an association established in 1949. It
is a nationally organised NGO and lobby group.
Its main aims are the
reduction of taxation and public spending, as well as the reduction of
bureaucracy and public debt and it purports to represent the views of
German tax payers. The organisation’s outlook is very conservative and it
strongly favours Government spending cuts. It is wary of the financial
guarantees that Germany has given under the EFSF on account of their
potential future burden on the taxpayer. Mr Stuchel, the deputy head of
the organisation and Mr Warneke, head of the budgetary section made a
presentation to the delegation.
At the entrance to the German Taxpayers Federation building is a display
of the Public Debt in Germany – this now exceeds €2 trillion Euro - the
display is the so called “tax clock” which calculates the increase in German
debt by the second and this shows that public debt in Germany increases
by some €1,300 per second.
now in excess of €24,500.
The public debt per capita in Germany is
The delegation was advised that the Public
Debt Clock was a powerful tool as both citizens and media organisations
were able to focus public opinion on the cost to Germany of the bail-out of
the Euro and in this regard, for German taxpayers, the Irish bailout is
even less popular with those funding it than it is here in Ireland.
The delegation was advised that the German Taxpayers Federation
produce an annual book on public waste, it is called the ‘Black Book’ and
is now in its 39th Issue.
The ‘Black Book’ details incidence of waste of
federal taxpayers’ money with examples from different areas in which the
public sector lacked an economic and efficient use of taxpayers' money.
The book documents numerous examples of federal, state and local
government, where the waste of taxpayers' money in various forms and
with different amounts of money is discovered. The delegation was given
an example - the construction of bridge over a duck pond at a cost €1
million.
The pond during construction had a pathway built around it.
However, it was also decided to build a bridge over the pond and this was
considered
to
be
a
waste
of
taxpayers’
money
given
that
the
13
circumference of the pond was less the 150 metres. The ‘Black Book’
highlights bad planning, cost overruns and deficits in procurement.
8.
Heinrich Böll and Ireland Evening: Film screening, short
lecture & reception
The Embassy of Ireland hosted the launch of a new book “Heinrich Böll
and Ireland” by Dr. Gisela Holfter a Senior Lecturer in German and Joint
Director of the Centre for Irish-German Studies at the University of
Limerick.
The launch included a screening of “Irland und siene Kinder”
followed by a presentation by Dr. Holfter and an open discussion; René
Böll a son of Heinrich was also in attendance. Members of the delegation
took the opportunity to attend and to meet with the German and Irish
audience.
9.
Briefing and exchange of views with the German Institute
for Economic Research (DIW)
Founded in 1825, the German Institute for Economic Research (Deutsche
Institut für Wirtschaftsforschung – DIW Berlin) is the largest economic
research institute in Germany.
Its core mandates are applied economic
research and economic policy consulting as well as the provision of
research.
The delegation were advised that work of the Institute is divided,
thematically,
into
nine
Research
Departments:
Macroeconomics;
Forecasting and Economic Policy; Development and Security; Energy,
Transportation, Environment; Climate Policy; Innovation, Manufacturing,
Service; Competition and Consumers; Public Economics and Education
Policy. The Institute is predominantly publicly funded and 120 of its 180
staff are research economists.
The institute’s core responsibilities are
applied economic research and economic policy consulting. Dr. Ferdinand
Fichtner, Head of Forecasting and Economic Policy was joined by senior
DIW economists Kerstin Bernoth and Simon Junker as well as Professor
Sebastian Dullien.
14
The focus of discussions was on Ireland and the Euro zone and the
presentation given is attached at Appendix 5.
Deputy Mathews raised the matter of re-hypothecation.
In the view of
DIW the problem is not with the secondary markets rather with the
interbank system as the linkages are between Governments and the
Interbank system where, in the view of DIW, the Government are doing
their job. However, DIW was unsure of this being the case in the banks as
they consider the banks do not have enough capital reserves and with the
current crisis Government bonds are not a secure as they were. In this
regard, DIW considers that the Interbank system is not working as
Governments wanted the banks to reduce the level of national sovereign
bonds held whereas the opposite has occurred. In regard to a question by
the Chairman on whether the Fiscal Compact is sufficient, the DIW view
was that this is not tackling the current crisis or the cause of the crisis. In
the view of DIW it is not the capital flows that causes problems, it is what
the capital is used for; asset bubbles. In response to a question by Deputy
Doherty, DIW considered that Eurobonds could be a solution to the crisis
but they are considered to be too cumbersome, as to have Eurobonds
requires that Europe becomes both more democratic and federal and in
reality they cannot work without ever greater fiscal union.
Deputy
O’Donnell enquired as to what stage did, or would, DIW consider that the
debt would become unsustainable and what would be a solution at that
stage.
DIW considered that if a Federalist or Transfer Union was not
achievable then a Marshall Plan type solution would be needed.
10.
Meeting with Professor. Helmut Anheier, Dean of the Hertie
School of Governance & Professor Mark Hallerberg.
The Hertie Foundation carries on the life’s work of Georg Karg, owner of
the Hertie department stores. Founded in 1974, it is one of today’s largest
foundations in Germany, with assets to the order of over € 800 million. In
1998, the Foundation sold its shares in the company, and has been
independent since.
In 2003 the Hertie Foundation founded the Hertie School of Governance to
15
institutionalise research and teaching on new forms of statehood and
societal governance. The mission of the Hertie School of Governance is to
prepare students for leadership positions in government, business, and
civil society institutions, to produce knowledge for good governance and
policy-making, and to encourage responsible stewardship of the common
good.
Professor Anheier welcomed the delegation and due to an unexpected
issue advised he could not remain for the full discussion.
Professor
Hallerberg, given the time constraints, suggested that the delegation
should
agree
one
specific
topic
for
discussion.
However,
before
commencing he did wish to pose a pertinent question – had the
Parliament every debated what the EU Commission had said in their
report post each quarterly visit by the Troika? The delegation did agree to
solicit the views of Professor Hallerberg in regard to the issue of Debt
Break3.
Professor Hallerberg, who was American and not German, considered that,
from his experience, Germans are very legalistic and hold the German
Basic Law or the de facto German Constitution in very high regard.
Professor Hallerberg noted that in 1990 Germany was reunified and post
reunification some of the Landers, or States had to be bailed out,
however, some Landers did not adhere to the terms of the bail-out.
Therefore, German citizens have direct, recent experience of a bail out
process, albeit an internal Federal State to Landers bail-out, whereby
some of those Landers being bailed out did not act in accordance with the
conditions of the bail-out.
A point of importance in regard to this
experience of bailing out the Landers was that this was down to Germans
themselves, it was self-inflicted.
This, Professor Hallerberg suggested, was a key experience and of greater
importance to understanding the national ‘psyche’ or attitude to debt
breaks (bails-outs, debt forgiveness or debt write down) – if the Landers,
3
The 2011 fiscal year is the first occasion Germany’s new budget rule is being put into practice. Known as the ‘debt
brake’, the new arrangement replaces the ‘golden rule’ applicable until 2010 and contained in the relevant section of
Germany’s constitution, namely the old version of Article 115 of the Basic Law
16
that formed part of the German Federal State, did not adhere to
conditions laid down in a bail-out then what would occur if Member States
of the Euro zone or European Union did the same in regard to any bail-out
that would be funded in whole or part by Germany? Professor Hallerberg
considered
that
this
particular
experience
allied
to
how,
on
the
establishment of the Euro, Germans were told by the political elites that
bails-outs would not happen is key to understanding the German attitude
to issue of debt.
In regard to a question on the Fiscal Compact, Professor Hallerberg noted
that the issue of ‘cementing’ into a Member State’s constitution of a debt
break rule was not all it might at first purport to be in regard to Germany.
In this regard Professor Hallerberg advised the delegation that two
matters should be considered; firstly, the debt break rules would only
enter into force of a phased basis in Germany and secondly, under the
German Basic Law - on a majority vote in the Bundestag - the Federal
Government can set aside the Basic Law and thereby circumvent any
fiscal rule or debt break provision. Professor Hallerberg advised that this
last occurred, the suspension of the provision of the Basic Law, in the
early 1990s so as facilitate Germany reunification.
11.
Wrap up meeting
Following the conclusion of the meeting with Professor Hallerberg
members had a wrap up discussion with the Ambassador.
It was
considered that the visit was important in that as Parliamentarians the
delegation were now informed as to both the thinking of German citizens
and that of German Parliamentarians. Communicating an understanding of
the difficulties faced by Ireland could only progress the case for change at
a pace which was acceptable to the general body of citizens.
_______________________________
Alex White T.D.
Chairman of the Joint Committee
April 2012.
17
Appendix 1
Programme for the visit of the Joint Committee on Finance,
Public Expenditure and Reform, Berlin, 25-27 January 2012
Wednesday, 25 January
12.05
Depart Dublin on EI 334
15.15
Arrive Berlin Schönefeld Airport
16.30
Arrive Hotel following train transfer: Motel One, Spittelmarkt
17.15
Briefing at Embassy
Embassy of Ireland, Jägerstrasse 51, 10117 Berlin
18.00
Meeting with Berlin based Irish business community
representatives
Embassy of Ireland, Jägerstrasse 51, 10117 Berlin
Thursday, 26 January
08.30
Working breakfast with members of the German-Irish
Parliamentary Friendship Group of the Bundestag
Bundestag, Platz der Republik 1, 11011 Berlin
11.00
Meeting with Petra Merkel MdB, Chair of the Budgetary
Committee of the Bundestag and selected Committee
Members
12.30
Working lunch with Budgetary Committee
Bundestag, Platz der Republik 1, 11011 Berlin
(Consecutive interpretation will be provided at meeting and lunch by the
Bundestag)
15.30
Meeting with Chair, Gunther Krichbaum MdB, Chair of the
European Affairs Committee of the Bundestag and selected
Committee Members
Bundestag, Platz der Republik 1, 11011 Berlin
17.00
Meeting with the Organisation of German Taxpayers (NGO)
19.00
Attendance at Heinrich Böll and Ireland Evening
Film screening, short lecture & reception
Opportunity to meet with German and Irish audience
(Event is part of the Embassy’s public diplomacy programme
and open to the public)
Embassy of Ireland, Jägerstrasse 51, 10117 Berlin
18
Friday, 27 January
08.30
Briefing and exchange of views with the
German Institute for Economic Research (DIW)
Mohrenstraße 58, 10117 Berlin
10.00
Meeting with Prof. Helmut Anheier, Dean of the Hertie School
of Governance & academic colleagues
Hertie School of Governance, Friedrichstrasse 180, 10117
Berlin
11.00
Wrap up meeting at Embassy
Embassy of Ireland, Jägerstrasse 51, 10117 Berlin
12.15
Depart for Schönefeld Airport (train transfer)
15.15
Depart for Dublin on EI 335
17.20
Arrive Dublin
19
Appendix 2
Participants in Business Event with Oireachtas Joint
Committee
25 January 2012
Ciara Breslin
Fergus Burke
Sean Clarke
Jody Gannon
Barney Mathews
Henry Norton
Eddie McGreal
Brian O’Connor
Adrian O’Sullivan
Nicole Srock Stanley
Billy Telford
UFA Cinema (animator)
RB Architects
Arup
The Big B Animation
Cooley Group
Norton ICRN
Imilia Interactive Mobile Solutions
Rethink (Chair of Irish Business Network Berlin)
European Property Inv
Dan Pearlman
Next Estate
20
Appendix 3
Meeting and Working Lunch with Budgetary Committee Bundestag 26 January 2012
Irish Participants:
Deputy Alex White, Labour (Chair)
Deputy Liam Twomey, Fine Gael (Deputy Chair)
Deputy Michael McGrath, Fianna Fáil
Deputy Pearse Doherty, Sinn Féin
Deputy Richard Boyd Barrett, United Left Alliance
Deputy Kieran O’Donnell, Fine Gael
Deputy Peter Matthews, Fine Gael
Senator Michael D’Arcy, Fine Gael
Ambassador Dan Mulhall
Maeve von Heynitz
Ronan Lenihan, Clerk
German Participants:
Petra Merkel, SPD (Chair)
Norbert Barthe, CDU
Bernhard Schulte-Drüggelte CDU
Klaus –Peter Willsch, CDU
Bettina Hagedorn, SPD
Klaus Hagemann, SPD
Lothar Binding, SPD
Tobias Linder, Green Party
Dr. Beate Hasenjäger, Head Clerk
Mr. Carsten Bösche, Clerk
21
Appendix 4
Meeting with the European Affairs Committee
Irish Delegation:
Deputy Alex White, Labour (Chair)
Deputy Liam Twomey, Fine Gael (Deputy Chair)
Deputy Michael McGrath, Fianna Fáil
Deputy Pearse Doherty, Sinn Féin
Deputy Richard Boyd Barrett, United Left Alliance
Deputy Kieran O’Donnell, Fine Gael
Deputy Peter Matthews, Fine Gael
Ambassador Dan Mulhall
Maeve von Heynitz
Ronan Lenihan, Clerk
German Participants:
Mr Gunther Krichbaum CDU (Chair)
Mr Alois Karl CDU
Mr Andrej Hunko Left Party
Ms Gabriele Molitor FDP (Liberals)
22
Appendix 5
Presentation: Macroeconomic Developments in Germany
and the World Economy – DIW Berlin, 27 January 2012.
23