Wednesday 21 February 2018

The past is a foreign country -- but Europe is closer than that

The deep roots of our long-lasting association with the European project shouldn't be forgotten in the current debate

WHAT a difference even a year makes. This time last year the stories gripping the public were all about the manifestoes of the main political parties.

Remember? We were told not a another red cent would be put aside for Anglo's bondholders; it was time to renegotiate the EU/IMF agreement; lots of comparisons (devoid of smugness, this time) with Iceland were made; statistics began to show Irish people were emigrating again in large numbers; deposits continued to leave Ireland's banks, credit was scarce, the first pieces of our fiscal framework were put in place; the possibility of debt writedowns at an EU level was discussed at length in the media; an anti-German element began to infect our national conversations; and Bertie Ahern let it be known his one major regret when leaving office was not getting the Bertie Bowl built.


One year on and the fiscal framework is a fact; the bondholders have gotten several billion cents of varying colours from our new Government; and the only game in town is making our Government's expenditure match our taxation income in as short a time as possible, while trying to renegotiate the payment schedule of this year's €3.1bn of promissory notes.

Ireland's growth rates have been revised downwards. This time last year we were told the economy would grow in 2012 by an anaemic 2.5 per cent. Today the economy is forecast to grow in 2012 by 0.5 per cent. What a difference even a year makes.

Or not.

Looking back a decade to February 2002, we can see the debate raging over the Nice Treaty -- the clear identification of the democratic deficit at the heart of Europe, with calls for a directly elected president of the European Commission.

A stronger euro was hammering Ireland's exports, and public-private partnerships seemed like the way to make sure roads and schools were provided with private efficiency.

AIB's shares were rising amid talks of a foreign takeover.

Those were the days.

Now look back 50 years to February 1962. Barely one million people were in employment. Those lucky enough to work could escape Cliff Richard and the Shadow's Young Ones, (No 1 in the charts that month, beating Elvis Presley). The Lemass government had established the Committee on Industrial Organisation to modernise Ireland's industrial structure by turning the focus of the economy outward by marketing the country abroad and cutting subsidies to unproductive indigenous sectors.

Ireland's economy was transitioning from largely agricultural to light manufacturing, built on foreign direct investment. Ireland had just been turned down for admittance to the European Economic Community (we would not be accepted until 1973).

This point bears repeating.

Ireland has either been trying to get into, or has been an integral part of, the European project -- for more than 50 years.

The deep roots of Ireland's association with Europe should not be forgotten in the current debate. The debates raging over imbalances at the heart of Europe, and the need for a federal European structure where taxes and transfers flow from rich to poor countries automatically, seem to forget that the European project is an economic solution to a political problem.

The political problem is how to stop Germany and France shooting at each other. The years since 1945 have been the longest period since 113BC in which no army has crossed the Rhine with fire, sword, or musket.

The economic solution is to get the nations to trade with one another. That the structure of this trade is not ideal, and that the countries involved pursue their own agendas within an imperfect structure, is not ideal -- but it is preferable to the alternative.

We might dislike the perceived intrusion of the Troika's representatives into Irish affairs but, in one form or another, Ireland has courted and embraced the European project for more than 50 years. Ireland has benefited from the European project, and it has suffered, partly to maintain the integrity of the European banking system.

It is now in the gift of the Europeans to relieve that suffering, at least partially, by allowing Ireland to defer the payment of €3.1bn of promissory notes until a time when the most indebted economy on Earth can shoulder this debt and have a possibility of paying it off. It is in Europe's best interests to help us prosper, as it has in the past.

Stephen Kinsella lectures in economics at University of Limerick and is co-director of the Centre for Organisational Science and Public Policy

Sunday Indo Business

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