Business World

Friday 19 January 2018

Get ready for the impending eurogeddon

WHILE the flurry of cross-channel ministerial visits is almost certainly primarily motivated by the desire of both the British and Irish governments to prevent the introduction of a pan-European "Tobin tax" on financial transactions, don't be surprised if both sides are also discussing possible contingency plans for what might happen if the eurozone either shrinks or disintegrates entirely.

On Thursday, Taoiseach Enda Kenny was in London meeting UK Prime Minister David Cameron. On Friday, UK Deputy PM Nick Clegg was in Dublin, while last month Finance Minister Michael Noonan travelled to London to meet with his new best friend, UK Chancellor George Osborne.

What can the two sides be discussing?

The fact that Britain remains Ireland's largest trading partner, while Ireland is the UK's fifth largest trading partner, certainly gives both sides plenty to talk about.

Then there is the small matter of the huge exposure of the two state-controlled UK banks, RBS and Lloyds, to Ireland. Britain also contributed £7bn to the November 2010 bailout.

However, both sides are likely to have spent most of their time talking about the EU's proposed "Tobin tax". Britain is adamantly opposed to such a tax, fearing (probably rightly) it would disadvantage the city of London, while we are worried about its impact on the IFSC.

But was that all they were discussing?

With the Bank of England having instructed UK banks to draw up contingency plans for a eurozone break-up, and the Irish Central Bank forced to publicly deny that it is printing punts, are the two countries preparing for eurogeddon?

It would be surprising if they weren't.

Sunday Indo Business

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