Friday 28 October 2016

John Downing: Risk of 'Grexit' and 'Brexit' compound Kenny's woes

Published 15/06/2015 | 02:30


With ugly terms like "Grexit" and "Brexit", is it any wonder people struggle to like the European Union?

  • Go To

Sadly, we have to park the indignation about language atrocities, and accept that we will hear a lot about both these issues in the coming weeks. And we must accept that both have real implications for our standard of living over the coming decade or more.

Enda Kenny is in London next Thursday and in Brussels the following Thursday for two rather important meetings. The London meeting is with British Prime Minister David Cameron while the second is an EU leaders' summit.

At the end of these meetings the Taoiseach will be able to make a big a assessment of two things: the future prospects of the Eurozone; and what are the odds on Britain remaining a member of the EU.

On the first one, we can only hope that the negotiators try harder this coming week and do a belated deal keeping Greece inside the euro. We have had too many Greek debt deadlines, but now the real and final one looms: by June 30, if compromise is not reached with Athens, the country will crash out of the EU single currency.

That would open a Pandora's box for all of Europe and directly threaten Ireland's nascent economic recovery. Trips abroad to discuss foreign affairs frequently offer a certain respite for Taoisigh from the domestic political pressure cooker - but these two meetings may leave Enda Kenny reassessing the odds on getting re-elected.

The British referendum on EU membership is the key economic implication for Ireland of last month's British election result. A British EU exit, or "Brexit" if you really must mug the English language, would carry clear economic and political risks for Ireland.

The British vote itself is likely to follow the coming Irish general election, and handling the implications will be a job for the next Dublin government. But being seen to do everything possible in the run-in to the British vote is extremely important for the current Government's re-election prospects.

The planning has been stepped up with a special unit tracking the issue in Roinn an Taoisigh.

There is no doubt that losing our biggest trading partner from the EU would carry economic costs. One estimate, by the Open Europe think-tank in London, is that it could cut Irish GDP by up to 3pc by 2030.

But Britain's EU departure could create Irish opportunities. Being the only native English-speaking EU member state could help the intensely competitive quest for overseas investment.

Speculation continues that some of the 250 international financial firms in London might be lured to Dublin's IFSC. But in the long term a more deregulated Britain outside the EU could more aggressively cut costs in this dogfight for the multinational investment money.

David Cameron's government is working on a referendum before the end of 2017, but it could happen next year. Everything depends on how quickly Britain can complete negotiations on its future relationship with the rest of the EU. Mr Kenny will be looking especially for a time frame at these two forthcoming meetings.

The big and more immediate concern in Dublin is about the uncertainty for the economy and business, in the run-in to a British referendum, and in the immediate wake of a possible vote to leave the EU.

This would lead to a long period of talks on the management of Britain's future relationship with Europe. Britain could opt, like non-EU members Norway and Iceland, to be part of the so-called European Economic Area, with free movement of goods, services, people and money continuing. Otherwise, it could try to negotiate a bilateral deal with the EU.

Any way you look at things, Ireland would have to monitor every single detail of these talks. We would also have to work out extended agreements to deal with the de facto land border with the British jurisdiction.

There are huge cost implications for Ireland, as the UK takes 13pc of Irish food exports and 20pc of services exports. On the other side 30pc of total imports come from the UK. It all totals €1bn per week in trade between the two countries. There are thousands of Irish small businesses for which British exports are their lifeblood.

There is unsurprisingly a doctors-differ-patients-die take on the issue. Strategist Robbie Kelleher, in a study for Davy consultants published in April, felt it was all ultimately quite manageable. In extremis Britain would re-work its arrangements with the EU; Ireland would make new deals with Britain.

But Danny McCoy of IBEC was not so sanguine. In an interview with Germany's 'Frankfurter Allgemeine Zeitung' newspaper last month, in extremis, he could foresee Ireland following Britain in leaving the EU. Distressingly for those of us who abhor language atrocities, they styled it "Irexit" following "Brexit". Ugh!

There is every chance that Mr Kenny and his Government colleagues will come under pressure to utterly rule out such an option earlier rather than later in these proceedings. There is a very fundamental issue at stake, which, at its heart, is political for all the vital economic matters which accompany it. Ireland must stay in the EU.

More immediately, the prospect of Greece threatening the future of the euro is more real than the risk of Britain's EU exit. But, these are huge issues which will quickly confront us all. The reports back by Mr Kenny from these two meetings will be keenly watched. The challenges for this Government lie as much without the borders as within.

Irish Independent

Read More

Promoted articles

Don't Miss

Editor's Choice