Monday 18 June 2018

EU is our best bet but beware the firepower of pact's big guns

Brexit may have repercussions for Ireland but Franco-German dominance of a reorganised union may be more serious, writes Colm McCarthy

POWER: European Central Bank president Jean-Claude Trichet
POWER: European Central Bank president Jean-Claude Trichet
Colm McCarthy

Colm McCarthy

Irish policymakers are understandably alarmed about the worsening economic environment created by Britain's likely departure from the EU's single market and customs union, but there could be equally troublesome changes coming in the structure and operation of the Eurozone.

Continuing membership in the European Union has been judged by the main political parties, business federations, labour and farming organisations as the correct response to Brexit. Joining the EU back in 1973 enjoyed widespread public support at the time and has retained popular approval in opinion polls ever since. Most economists believe that EU membership has been, and remains, the best choice for Ireland, even with Britain's unwelcome departure. But the decision to scrap the independent Irish currency in 1999 has not worked out so well: a case can be made for the view that the Irish financial bust would have been smaller, and hence the fall-out easier to manage, had the temptation to join the common currency been resisted. Aside from the damage wrought by Jean-Claude Trichet's ECB during the financial rescue programme, Eurozone membership has precluded any response to the gyrations of sterling, currently both weak and volatile.

Departing the common currency is horrendously difficult, a practical impossibility for countries that find themselves in financial trouble. Not even Greece chose this route during the crisis. However debatable Ireland's decision to abolish the national currency in 1999, there is no ready procedure for exiting the Euro. So Irish government policy has two important strands: to stay in the 27-member EU and also in the 19-member common currency. In current circumstances there is no appealing alternative in either case.

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