Thursday 23 October 2014

Ireland is too small to topple the continent

Published 21/12/2013 | 02:30

European Commission President Jose Manuel Barroso (L) during a European Union leaders summit in Brussels on Thursday
European Commission President Jose Manuel Barroso (L) during a European Union leaders summit in Brussels on Thursday

EUROPEAN Commission president Jose Manuel Barroso put the cat among the pigeons when he used a late-night tirade to blame the euro's problems on Ireland.

He may be guilty of interfering in domestic affairs and he may have scored badly when it comes to diplomacy, but was he right? Is Ireland really the cause of Europe's problems?

The simple answer is, not really.

The financial problems of other member states and the sclerotic decision-making process mean Europe would be mired in crisis regardless of Ireland's contribution to the mess.

While our catastrophic failure to regulate banks exacerbated the crisis, the origins of the crisis are far deeper than Mr Barroso suggested.

The global financial crisis began in 2007 with problems in the United States, and the eurozone crisis became serious when the Greek economy went off the rails.

Ireland's problems did not spark these greater problems, and did little to make them worse. Nor did our problems have any noticeable effect on the crisis in Mr Barroso's native Portugal.

There is plenty of evidence for this but the most obvious factor is our size.

Weighing in at less than 2pc of Europe's economy, Ireland is simply too small to bring down the continent single-handedly.

It was not Ireland's woes over the past few years that led ratings agency Standard & Poor's to cut the European Union's prized AAA credit rating yesterday.

The agency was worried about much bigger problems, including UK Prime Minister David Cameron's referendum promise and the squabbling over Brussels spending.

It is also a fact that Europe's inept interventions made our problems worse than they needed to be. Anybody who watched the endless summits up close will know that it was far from perfect. The fear and greed on display prolonged what was already an impossible situation and continues to this day.

Europe's insistence that the last government repay senior bondholders was a mistake. The bailout of Cyprus and the decision this week to introduce a similar system for future bank collapses shows that the European powers have learned from their mistakes, but that wisdom came too late for us.

That Europe forced Ireland to make a series of bad decisions is not a view limited to this country; even the architects of the bailout from the hard-headed International Monetary Fund have said much the same thing.

Former IMF Ireland mission chief Ajai Chopra has admitted that it was unfair for Irish taxpayers to suffer the cost of bailing out the banks when senior bondholders got their money back.

Still, while Mr Barroso went too far, his tantrum does contain a kernel of truth and reflects the reality many people in this country fail to accept, that the bailout was an act of solidarity that followed a request from a democratically elected government.

The xenophobia displayed by many politicians and members of the public towards Germany in particular, and Europe in general, must seem intolerable at times to officials who have worked hard to help Ireland.

Mr Barroso was illogical and childish to blame so many of Europe's problems on Ireland but he showed no more stupidity than those politicians and voters here who blame so many of our problems on Europe. So many mistakes were made in the crisis that very few leaders can do anything other than hang their heads in shame.

Irish Independent

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