Saturday 22 October 2016

What did the Germans ever do for us in the EU anyway?

Published 13/07/2016 | 02:30

German Chancellor Angela Merkel (R) and Irish Prime Minister Enda Kenny get ready to address a joint news conference at the chancellery in Berlin. JOHN MACDOUGALL/AFP/Getty Images
German Chancellor Angela Merkel (R) and Irish Prime Minister Enda Kenny get ready to address a joint news conference at the chancellery in Berlin. JOHN MACDOUGALL/AFP/Getty Images

With due apologies to the Monty Python team, it used to be very easy to list off a host of good things Germany had done for Ireland in the European Union.

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Up to about 2010, since the Germans stumped up one-third of the EU funds and these funds flowed abundantly for two decades into Ireland, you could go on for some time. The road upgrades, the railway rolling stock and the handsome farm grants were just a flavour.

But apart from all those goodies, there was the nasty business of legacy bank debt, which really came home to roost after the EU-IMF Troika's €67.5bn bailout in November 2010. It is tempting to look at what happened in that period and then project forward into the fate of Ireland's current efforts to argue that this country is hugely at risk in the post-Brexit era, as the EU and UK begin framing new relationships.

In June 2012, Enda Kenny arrived back from an EU leaders' summit and we were told that the Government had secured a "game changer" which would lead to retrospective help for some of the €40bn of legacy Irish bank debt.

German Chancellor Angela Merkel had gone out of her way after that summit, and after another confusing episode in October 2012, to say that Ireland was "a special case".

Ireland's argument for some form of special support was that we had "taken one for the Euro team" when we were not allowed to burn some bondholders in the wake of the banking collapse.

But we now know that Ireland's "special case" was based on the constructive ambiguity of diplomatic language. In the end, the German government could not justify spending German taxpayers' money on new funding arrangements for Ireland's crocked banks.

For critics in Ireland of both the Government and the EU, it was a straight "betrayal by Europe" and "false posturing" by Enda Kenny and his Government.

Well, maybe it would help to look at things from the Berlin side of the equation. Ireland's access to cheap European Central Bank money did not make borrowing to fuel a ruinous property bubble mandatory.

Ireland did not have to pursue 'light-touch' bank regulation and anyway just one-third of our financial woes related to the banks. The rest related to the collapse in tax revenues and the need to borrow to sustain welfare and services.

It is pointless and time-wasting to weigh things down with sentimental arguments. Germany never had much sympathy for an Ireland which has lured in overseas investment with a company tax rate of 12.5pc.

Nor was Germany the only country opposing retrospective action on bank debt. Finland, Netherlands and others were equally exercised in their opposition.

There was also a practical impediment in that nothing could happen until the banking-supervisory European Stability Mechanism was set up and that was a prolonged process.

But Germany can argue that it did help in yielding to lower interest rates and other things, like extended debt terms, for Ireland and other bailout countries. The Government bit the bullet, the Irish people were stoic for a time and the country cleanly exited the bailout.

As early as June 2014, Finance Minister Michael Noonan was walking quietly away from the idea of retrospective EU help over bank debt. He made the point that by then, 18 months after Ireland's exit from the bailout, five countries were paying more to borrow on bond markets than Ireland.

Help on Ireland's bank debt required the unanimous approval of member states. How, in June 2014, could you convince Spain, Italy, Portugal, Greece and Slovenia, all of whom were paying higher interest, that Ireland was a special case?

So what can we conclude from all of that?

Well, it's very clear that Ireland has it all to do to convince the EU of our very real needs, as our biggest trading partner exits the EU, leaving us also with the reality of an EU-UK frontier.

Our case must be framed in EU terms, but we also have to be ready to take things to the limit.

Germany will help - a bit.

Irish Independent

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