Comment

Thursday 24 July 2014

Kenny's staying and David Cameron is out in the cold

Brussels summit shows how Ireland’s fate is 
determined from afar as budget clash looms in the autumn

Dan O’Brien

Published 29/06/2014|00:00

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David Cameron
Taoiseach Enda Kenny. Photo: Peter Cavanagh
Taoiseach Enda Kenny. Photo: Peter Cavanagh

Enda Kenny will remain Taoiseach until the next election. This island's nearest neighbour is drifting further into North Atlantic isolation. The risks of the Government clashing with Brussels over the next budget later in the year are greater than ever.

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These are the three big takeaways from the meeting of Europe's leaders at the end of last week.

Of the many implications of the summit last Thursday and Friday, the one that is the most immediately relevant to Ireland is that Enda Kenny will never hold a big Brussels job.

With the Presidency of the European Commission having been given to centre-right Jean-Claude Juncker on Friday, the only other job Kenny was in the running for - the Presidency of the European Council - must go to the centre-left, the other main political "family" in Europe.

The Taoiseach's European parachute is now gone. The much-speculated upon possibility that he might give up the top political job in a country of 4.6 million people for a leadership position in a bloc with a population of half a billion is now definitively over. He is in for the long haul at home, however short that may be.

As an aside, it is worth noting that Ireland has rarely held leadership positions in EU institutions and that this, at least in part, reflects a self-harming parochialism in Irish politics.

Uncosmopolitan Kenny never wanted the job because he has no real interest in affairs beyond this island and when there have been serious Irish candidates for big jobs in the past, such as Pat Cox and Peter Sutherland, their chances were scuppered by governments in Dublin caring more about short-term domestic considerations than boosting Ireland's international influence over the longer term.

A second important implication of the anointing of Juncker on Friday relates to the UK's place in Europe.

Britain has been moving towards exiting the EU for a very long time, and the determination of British Prime Minister David Cameron to fight a battle he knew he could never win (in attempting to block Juncker's appointment) moves the country one step closer to departure, and puts Ireland in the nightmare scenario of having its nearest neighbour drag it out of its natural European orbit.

Diplomats and Brussels insiders have been amazed at Cameron's insistence on being a loser in the Commission presidency battle and see it as further evidence of his willingness to isolate himself, as he did in December 2011 over the Germany-inspired fiscal treaty.

Then, as was the case on Friday, Cameron could muster only one other leader to support his cause (and that the leader who supported him last week was Hungary's demagogic Viktor Orban will have further isolated the British PM).

Cameron made matters even worse for himself by earlier making crude threats of "consequences" should his prime ministerial counterparts give the job to Juncker. Quite how he could, or would, even want to make life more difficult for other countries without damaging his own country is not clear. What is clear, however, is that there are lots of negative consequences for Britain flowing from his stance.

For a start, as long as Cameron and Juncker occupy their respective positions, it is very difficult to see even the most basic of working relationships between Downing St and the Berlaymont. Most immediately, that all but scuppers the chances of Britain securing for itself an influential commissionership in the autumn.

But the consequences are much more serious than London's likely reduced clout in the Brussels technocracy over the next five years.

With the Conservatives increasingly hostile towards Europe and the rest of Europe ever more frustrated with Britain, the English Channel is widening and alienation on both sides of it is growing.

The chances of Cameron persuading his 27 EU counterparts to reform fundamentally the way the entity works in a way that pleases Eurosceptic Britons, as he has staked his political career on doing, are now as good as dead.

As Daniel Hannan, a clever Conservative MEP who advocates withdrawing from the EU, blogged on Friday: "If David Cameron couldn't prevent the appointment of Jean-Claude Juncker as President of the European Commission, no one will believe that he can deliver a more flexible EU."

With many more withdrawalists in the party who are less cerebral than Hannan and more visceral in their hostility to the EU, Cameron looks to be in an impossible position.

If the Tories do win next year's election (and a fast-recovering economy is giving them hope that they will) it looks even less likely after last week that the referendum on EU membership that Cameron has promised can be won.

The nightmare scenario for Ireland of "Brexit" (British exit from the EU) is closer to becoming a reality today than it was seven days ago.

The third big takeaway from the Brussels gathering relates to budgetary issues.

There had been some pre-summit discussion of a reopening of the book-balancing versus stimulus debate, as austerity fatigue intensifies and the recent electoral success of Italy's young premier, Matteo Renzi, tilts the balance of power a little less in Germany's favour (an accompanying column in the business section of this newspaper examines the truly depressing state of the Italian economy, along with the cheerier state of the wider euro-area recovery).

The mooted way of loosening budgetary strictures amounted to an accounting trick. That was to exclude government spending on investment from the way overspending is measured.

If that had been agreed it would have given Ireland the leeway to reduce the size of the adjustment in October's budget (and, in the process, rack up an even bigger public debt to be paid off in the future).

But that did not happen last week. The proposal to change the accounting rules will be considered, but not until the end of the year, well after all euro-area governments have put their budgets to their respective parliaments.

If anything, the Teutonic approach to public finances management was reinforced at the summit. The final communique was more austere than the original draft. A line saying that the leaders "respected" the existing budgetary rules, which was not in the original draft, was inserted over the course of the two-day meeting.

Those hoping for a watering down of the rules were disappointed.

From an Irish political perspective it is very difficult to see the new leader of the Labour Party being able to go along with the scheduled budget adjustment of €2bn in October and at the same time claim that she or he has made a break with the Gilmore era.

But if the adjustment is less than €2bn - something which the IMF and the Irish fiscal watchdog have advised against - along with the European Commission, then the latter body, which has the power to demand changes to budgets may well exercise that power.

For better or worse, what happens in Brussels, even after the departure of the Troika, has more impact than ever. Short of joining Britain on its drift into Atlantic isolation, that is not going to change.

Sunday Independent

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