Members of Joint Committee on Enterprise, Trade and Employment Meeting with Visiting Czech
Delegation from the national Assembly of the Czech Republic
Committee on budgetary control
Meeting with Members of
The Joint Committee on Finance, Public Expenditure and Reform
9 November 2011
Presented to the Joint Committee on Finance, Public Expenditure and Reform on 14 December 2011
Deputies Alex White, Chairman of the Joint Committee on Finance, Public Expenditure and Reform, Liam Twomey (Vice-Chairman), Jim Daly, Heather Humphreys, Kevin Humphreys, Peter Mathews, Kieran O’ Donnell and Senator Tom Sheahan met with a delegation from the Parliament of the Czech Republic on Wednesday 9 November 2011 at 10.00 a.m. in Room 2, Main Hall, Leinster House.
The delegation was comprised ofMs Helena Langsadlova MP, Vice-Chairperson of the Committee on Budgetary Control and Head of Delegation, Mr Radim Vyslouzil MP, Mr Vaclav Votava MP, Mr Jiri Dolejs MP, and Mr Radim Fiala MP. The delegation was accompanied byMr Petr Jelinek, Clerk to the Committee, Mr Josef Smycek, Deputy-Head of Mission at the Embassy of the CzechRepublic to Ireland and Mr Zdenek Hofman, Interpreter.
The Chairman, Deputy Alex White, welcomed the delegation to Ireland and to the Oireachtas and the opportunity to engage in discussions on matters of mutual interest to both countries. Ms Langsadlovathanked the Joint Committee for their warm-hearted reception in the Irish Parliament.
Both groups stressed the similarities between the economies of Ireland and the Czech Republic in that both are open market economies heavily dependent on exports. The Czech representatives expressed the hope of benefitting from Irish experiences in growing their economy and specifically the impact of eurozone membership.
Ms. Langsadlova indicated that while the Czech Republic had not yet joined the eurozone they are monitoring the position and it is in their interest that the current eurozone crisis is quickly resolved. They would like to focus on export policy and in particular on their need to diversify their export markets, asking if the Joint Committee could communicate its vision and ideas in this respect. Czech Officials have been closely watching developments in Ireland through 2007/8/9 and they have a high level of respect and admiration for how Ireland has managed and turned around the difficult economic situation.
Deputy White indicated that Ireland was not at the heart of the crisis, that eyes were focussed elsewhere, which was beneficial to the Irish position. Many aspects of the euro and differing opinions on the currency could be debated retrospectively, however, currently there is little disagreement on the need to defend the currency and its strength. He would do his utmost at this meeting to represent all the views of his committee colleagues representing different parties. Chairman White further stated that whatever solution is adopted it will involve closer integration across the eurozone. However, he confirmed that if any such solution required further treaty changes it would be controversial in Ireland.
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In relation to export policy, the Chairman highlighted its importance for Ireland; exports are becoming more and more important and even during the worst days of the economic crisis exports have continued to grow and increase market share. A priority for Ireland is to maintain exports at a high level and penetrate new markets with diversified and innovative products. The UK and European markets are most important for Ireland.
Ms. Langsadlova enquired as to whether Ireland is considering changing its export policy.
In his reply Deputy O’Donnell described Ireland as a small open economy which increasingly exports to emerging economies such as China, Russia and Brazil. He noted that Ireland had received delegations from all of these growth area countries. The euro had provided certainty in terms of stabilising exchange rates and maintaining low inflation. While seeking to expand our markets we must also give existing export markets proper attention. Expected export growth for 2011 is 5 – 6 %. Domestic growth brings jobs more quickly and sustainability for future exports. He stated it was important to distinguish that the Irish crisis is a banking one, not an economic/fiscal crisis. The change in architecture in Europe regarding the common currency means that the Czech Republic will be adopting a different type of euro from the one Ireland had adopted in the previous decade.
Ms. Langsadlova asked about the mix of measures adopted for the management of income and expenditure in Ireland.
Deputy Daly, in his reply, referred to the need for closer integration and especially to the need for closer social integration among the smaller states. The recent issue involving French President, Nicholas Sarkozy, on Ireland’s corporation tax rate had highlighted Ireland’s isolation and its need to build up alliances.
Ms. Langsadlova indicated that Czech growth patterns were similar toIreland in that it is closely influenced by the German and Russian economies.
Deputy Daly referred to the large number of visits to the CzechRepublic by Irish delegations in 2008 and bemoaned that these contacts and visits had not been maintained recently. He also asked about the relationship of Germany, Russia and Estonia with the CzechRepublic.
In reply to previous comments, Mr. Jiri Dolejs indicated that the Czechs viewIreland as a small country and an important part of the EU and that Ireland is working hard at playing its role in Europe. Referring specifically in the CzechRepublic, he verified that the banking sector is sound but there is a need to grow exports. The CzechRepublic is trying to revive traditional export markets such as Russia and China where there are huge industrial units and is looking for innovation assistance as documentedrecently.
Ms. Langsadlova replied to the series of questions by saying that the Czechs understand the Estonian economy is dependent on Russia and Germany but had not monitored Estonia so much – they had travelled to Ireland due to the great Irish inspiration.
Deputy White indicated that the Joint Committee does not have any special insight into the Department of Finance but he could refer to some information which is on the public record in order to assist the Czech delegation.
A key priority in Ireland is to reduce the General Government Deficit relative to GDP. There had been a General Election in February this year and a new government had been formed in March. The impact on the expenditure side will be higher than on the revenue side – an adjustment of 3.8 billion euro in the 2012 budget is expected. This will be made up of 1.6 billion euro through increased revenue measures (tax) and 2.2 billion euro on the expenditure side. The 2.2 billion euro figure includes capital expenditure. The objective is to reduce the General Government Deficit to 8.6% in 2012.
Mr. Vaclav Votava asked what would happen if the headline deficit target of 8.6% debt/GDP ratio is exceeded. Ms. Langsadlova added that the Czechs had exceeded a budget deficit 9 or 10 fold which was huge and asked what sort of consequences they could expect.
Deputy White indicated Ireland had achieved its targets for this year. Constant monitoring is continuing on a monthly if not on a weekly basis at the behest of the deal which had been agreedwith the EU/IMF/ECB. Ireland is being subjected to a extremely high level of scrutiny to ensure that the objective is achieved. While there might be debate on the 3.8 billion euro level of adjustment needed there is a high level of expectation that the budget will be passed. Once a target has been agreed the parties must sit down and work to achieve the adjustment set.
Deputy Kieran O’ Donnell enquired as to how both Ireland and the Czech Republic could practically co-ordinate increasing trading links. In response, Mr. Dolejs indicated that starting joint ventures between Irish and Czech companies would be a priority from the Czech perspective. He noted that Ireland’s technology and innovation design frameworks combined with Czech knowledge of the business environment in Russia and other eastern European countries could be beneficial to both parties.
Deputy Peter Mathews referred to the CzechRepublic’s commendable level of non-financial debt and asked about the levels of private household debt and corporate debt on the basis that in developed countries it is the combination of these three types of debt which can be suffocating. The lesson learned by Ireland through recent experience is to not let the banks wreck the economy as in our case – in Greece fiscal negligence had wrecked the economy
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Noting the visiting delegation’s itinerary, the Chairman concluded by thanking the visiting delegation for contributing to an engaging and constructive discussion. He wished the delegation a pleasant and rewarding experience for the remainder of their stay. Ms. Langsadlova thanked the Joint Committee for the fruitful discussion over the previous hour.
The meeting concluded at 11.00 a.m.
Ends
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