Saturday 7 December 2019

Brendan Keenan: We must convince investors we won't be forced out of EU in wake of Brexit

‘Middle England voted to remain and has yet to come to terms with the loss of automatic rights to jobs, education, residence and healthcare in the EU – never mind joining the tortuous ‘non-EU’ queues at airports.’ Photo: Reuters
‘Middle England voted to remain and has yet to come to terms with the loss of automatic rights to jobs, education, residence and healthcare in the EU – never mind joining the tortuous ‘non-EU’ queues at airports.’ Photo: Reuters
Brendan Keenan

Brendan Keenan

The Irish government's task is just about the only thing which is clear after the map of Europe was dramatically redrawn,

It will have to apply every ounce of muscle, sinew and brain to try to ensure that things come out as right as possible, as soon as possible.

Indeed, it will take more than the Government to avoid the loss of much of what we took for granted until a few hours ago. It will take the muscle, sinew and brains of the whole country.

Our capacity for having huge rows over very little will have to be replaced by a willingness to minimise rows over a very big things indeed.

Those priorities have already been outlined by several commentators. A rough list, in terms of urgency, would be: currency, investor confidence, free movement of people, banking, trade in goods and services, agriculture and energy.

It is quite a list. All are under threat, while none will be easy to preserve in any satisfactory form. The future growth rate of the Irish economy, and the jobs and income which come from it, will depend on how the negotiations turn out.

That growth has been put at 4pc a year over the next few years, declining to a stable 3pc in the next decade. That would be much the best performance by any high-income country but already it looks optimistic.

Something will have to be knocked off the forecasts for this year and next. It is depressing to see that, already, the main focus is on the effects on the package of goodies in the Budget.

To get back to priorities, immediate action may be needed to cope with the plunge in Sterling. Government insurance for exporters' short-term business borrowings has already been mentioned. Vat reductions for the hospitality industry may not be over yet.

Beyond that, the most important thing is not the value of Sterling, but its stability against the euro. Currency markets - and therefore Ireland - need an early blueprint for the terms of Britain's exit if they are to find a stable level.

For investors, we need a convincing story that Ireland can, and will, stay in the EU. If they cannot be convinced, the remarkable fall in the interest on government debt may reverse.

In the backs of minds will be the possibility of Ireland leaving the euro but staying in the EU. Remote, unlikely - but worth pricing in if you are a bond trader.

The other kind of investor - those who establish multi-national operations here - will indeed be wondering should they locate, or relocate, in Ireland. That is one of the few possible plusses - just as long as it does not get out of hand.

London's exclusion from EU financial services is a €50bn dagger at the heart of the UK economy. Former mayor Boris Johnson knows that, but many of his fellow-campaigners are going to learn the hard way.

If finance pours out of the City - some of it to Dublin - that will be a gain for us. But the damage it would do to Britain will result in collateral damage to the Irish economy and the parlous Irish banking sector. More particularly, it would damage the economy outside Dublin. That's precisely the kind of wealth concentration which lost the referendum for Mr Cameron.

The other big issue was immigration, which is why it will be hard to retain freedom of movement between the Republic and the UK. It is also intimately connected with the trade talks. If, as part of a generous trade deal, Britain accepted a fig-leaf restriction on immigration, free movement across the border and the Irish Sea might be preserved. If they really are determined to keep Romanians out, it won't.

If most analysts are right, Britons will find out soon enough the consequences of what they have done. It is sad, although understandable, to see the people of depressed south Wales probably signing the final death warrant of the steel industry; and those of Sunderland possibly the same for the Japanese car factories.

Middle England voted to remain and has yet to come to terms with the loss of automatic rights to jobs, education, residence and healthcare in the EU - never mind joining the tortuous "non-EU" queues at airports. In the end, they might settle for little more than Mr Cameron negotiated to stay in.

It will be difficult for the 27 to be that generous to them. Apart from not setting a precedent for other discontented electorates, the euro, Greek and refugee crises showed that national interests usually trump the good of Europe as a whole. Many such interests involve being tough with Britain.

Ireland may have to say that there are terms which are unacceptable to it, as well as to the UK, because of the damage it would do to this country; but it will have to make the case subtly and effectively.

Eurocrats would be horrified at any idea that Ireland might be forced out of the Union in Britain's wake: it remains to be seen how many governments would share that concern.

Irish Independent

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