Thursday 19 October 2017

Old pals act won't help us in new era of EU realpolitik

A demonstrator wears a Spanish national flag as others wear masks during a rally in Barcelona supporting Spanish unity Photo: Bloomberg
A demonstrator wears a Spanish national flag as others wear masks during a rally in Barcelona supporting Spanish unity Photo: Bloomberg
Brendan Keenan

Brendan Keenan

The comment of 19th century foreign minister Lord Palmerston, that Britain had no friends, only interests, neatly sums up the nature of international relations; and not just for great imperial powers.

If any country has tried to overturn Palmerston's dictum, it must be Ireland. It has relied implicitly - and sometimes explicitly - on its small size and unfortunate history to win friendly treatment on the international stage.

With some success, too. No-one really pressed us to join Nato, although it helped that they had Northern Ireland for top cover. After a bit of debate, Britain decided not to treat the new Irish republic as a truly foreign country - although the handy supply of labour played a part. The Americans undoubtedly gave us a good deal when it came to emigration, but domestic politics came into it.

The European Union is the boldest attempt yet to formally amend the Palmerston doctrine. There is even a friendship clause in the Treaties, where they say a country must not undermine the interests of the union as a whole. But the basic idea is that it is in the member states' own interests to give up some of their freedom to do as they choose.

Put that way, one can see that it is a fine enough calculation. When the self-interest in question was the avoidance of European war, it was, as the horrible cliche goes, a no-brainer. Especially since the pooling of sovereignty was pretty much limited to free trade in coal and steel, support for agriculture and, later, harmonised standards for industrial products.

That trade-off has shifted dramatically. Peace in Western Europe is assumed; although events in Spain are a reminder that peace should never be taken for granted. Equally, last week's spat with the commission over Apple's tax bill dramatically shows how far the EU has come in the pooling of sovereignty.

All the talk since the French election has been of more to come. President Emmanuel Macron is merely restating long-held French ambitions with his ideas for an EU finance minister, Treasury and enhanced budget. How far he gets will depend partly on how well he succeeds in reforming France itself.

The plodding prose of the commission may be a better guide to the future than lofty Gallic rhetoric. Brussels' recent "reflection paper" contains ideas as radical as anything from integrationist politicians. And when the commission has ideas, can proposals be far behind?

The EU was founded on economic policies and almost everything since has been led by economics. That is why it is so often criticised as a 'neo-liberal' conspiracy, despite the social democratic nature of most rich EU states.

Business has indeed been a powerful lobby in framing policy. But one cannot have a single market in goods, services and finance without rules and regulation to prevent governments protecting their national companies and workers at the expense of those from other states.

We are seeing plenty of the inevitable consequences right now. Pure nationalism is at the core of Brexitism in the UK Conservative party, but in the Labour party - and especially the now dominant left of the party - the inability to nationalise or give state support to utilities and services at the expense of other companies stirs significant Brexit emotions

The corporation tax furore involves both national self-interest and EU integration, which is why it is so toxic. Governments want the tax they think multinationals would have to pay if they did not have shelters like Ireland and Luxembourg (and the Netherlands, and Latvia, and whoever). Arbitraging competing national interests has always been Ireland's best hope, and pretty much its only strategy.

The commission wants everyone to operate the same system because that is the core of creating a European union - although there can be little doubt that Ms Verstager not only thinks there has been favourable treatment for some, but is enraged just by the scale of tax avoidance.

The difficulties are compounded by the fact that the great federations like the USA, Canada and Australia (all mainly English-speaking, alas), are built on the opposite principle: that states compete with each other except where federal law expressly forbids it. Mr Macron's vision and the US constitution are polar opposites but it is an incontrovertible fact that the EU could not have been built the American way. European governments and electorates would never have accepted it; and still won't.

The key question, as Britain leaves and the glaring holes in the European architecture wait to be fixed, is whether the next stage is going to be more of the same, not just ever deeper but ever wider too, or whether it is acknowledged that the radical ideas being reflected upon will require a greater tolerance of difference between members with varying traditions and levels of income and productivity

The EU has 27 legally-sovereign countries as members, with rather more languages. The tensions in Spain and Belgium are just two of many examples of the limits to which people are willing to share resources with those who do speak (or look, or worship) like them. Yet more such sharing is essential to the creation of a stable currency and safe banking system.

It is implicit in commission ideas such as a eurozone treasury or central stabilisation function, although Brussels was quick to insist that no permanent transfers between states would be required.

That is open to considerable doubt. There is also the question of risk-sharing - a matter close to Irish hearts. There is agreement in theory that a sound euro banking system requires the backing of the eurozone as a whole, but considerable doubt as to whether euro governments would be prepared to give that backing in practice.

With so much at stake, and so many conflicting interests, there is no future in relying on favours. The curious thing is that Ireland has many grounds on which to present itself as a model - along the lines of Nordic or Teutonic models.

Many foreigners down the years have seen it as such; only to be told by the Irish that it is all an illusion. Foreign observers who spend any time on the question are likely to be convinced by our incessant bickering that there is indeed something wrong underneath.

The bickering - much of it about imaginary issues which bear no relation to demonstrable facts - is what is wrong. Unstable politics has been the cause of our economic woes, but the Irish model itself has demonstrated flexibility and vigour which should indeed be the envy of many other states.

It is not all, or even mainly, about corporation tax. A fundamental choice will have to be made; between achieving broad consensus on the kind of economy we actually have, as well as what we want from it, and promoting and defending that system in Europe; or remaining detached from the EU in our particular way.

It is quite different from British detachment but just as insular and self-absorbed and in the end may be just as harmful. Teacher's pet is going to get bullied something shocking unless she does better in class.

Indo Business

Also in Business