Sunday 16 June 2019

What comes after Brexit could be worse for Ireland

A Franco-German refashioning of the eurozone could put national interests at stake, writes Colm McCarthy

Gesture politics: Theresa May has signalled that the preservation of Tory party unity was her main priority. Photo: Getty Images
Gesture politics: Theresa May has signalled that the preservation of Tory party unity was her main priority. Photo: Getty Images
Colm McCarthy

Colm McCarthy

Sixteen months on from the referendum decision, and six months since the Article 50 resignation letter, Theresa May chose to put the preservation, for now, of Tory party unity ahead of any other consideration in her Florence speech last Friday. Britain will not be pursuing a damage-limitation strategy in dealing with Brexit, but the Conservative party will hold together for another while.

Mrs May campaigned for a Remain vote in the referendum as her principal cabinet colleagues took the opposite view. The split in the Tory party is unresolved and she has wrestled indecisively ever since with the choice between the appeasement of the ultra-Brexiteers and the minimisation of damage to the British economy.

There was no decision, at last June's referendum, to quit the EU's single market. The box ticked by 51.9pc of voters signalled a desire merely to leave the European Union. Nobody voted to exit the single market, never mind the customs union.

Prominent Leave campaigners, including foreign secretary Boris Johnson, sought support on the explicit basis that Britain could quit the EU without economic consequences. Johnson stated, straight up, that he did not favour departure from the single market and has kept up the pretence ever since that the UK economy can somehow remain in Europe while the UK political system takes to the high seas.

His prime minister was peddling the same 'have your cake and eat it' line on Friday and the reaction from EU politicians was not a surprise. The UK will somehow retain 'the closest possible relationship with Europe' while, quite explicitly, quitting both the single market and the customs union.

Theresa May must know this outcome is impossible and there is no feasible set of negotiating concessions from the EU that will square the circle.

May's strategy, if that is not too flattering a description, is to demand that the EU should engage in all legal and constitutional contortions necessary to eliminate negative consequences for Britain of a British decision.

Britain has not been expelled from the European Union, Britain has chosen to leave a European project which it declined to join on its formation back in the 1950s. For pragmatic and transactional reasons it later decided to join and subsequently to quit.

The expectation that the EU will now remodel its internal market, the product of a half-century of political development, to minimise self-inflicted damage in a resigning member is seen in Europe for what it is, an internal party management headache for the Conservative party.

Britain's semi-detached status in Europe, with a budget rebate and opt-outs from the common currency and Schengen, is already seen on the other side of the channel as a unique concession.

The British mainstream media has drawn criticism for the poor pre-referendum public debate, but has done a further disservice in the period since.

There is an incessant portrayal of continental politicians as federalists blind to the flaws in EU structures and unresponsive to perceived failures.

This narrative feeds the emerging blame-game: if the 'have-cake-and-eat-it' policy position of the UK government, reiterated in all essentials in Florence, does not prevail, this will be the fault of unreasonable European politicians.

Jean-Claude Juncker, the European Commission president, has helpfully made himself available as a caricature Euro-bogeyman for the Eurosceptic press, and his state-of-the-union speech in Strasbourg 10 days ago was particularly ill-judged.

Juncker appeared to argue that Britain's departure was yet another opportunity to accelerate the federalist agenda, fuelling the blame-game narrative. The Daily Telegraph responded, and not unreasonably, with an editorial along the lines of 'we are well out of it'.

May's Florence speech on Friday can be summarised thus: given a choice between the avoidance of short-term damage to the Conservative party and long-term damage to the UK economy, the party comes first. This has the look of a doomed enterprise, since Tory unity will not survive a botched Brexit.

If the implicit intention of Florence - a costless departure from both single market and customs union - is impossible to deliver, the Tory party will eventually split.

The party's two key constituents, the business community and English nationalism, are on opposite sides on Europe and the resort to referendum has made reconciliation impossible. The first-past-the-post voting system in Britain has fostered a Labour and Conservative political duopoly for a hundred years, since the last great realignment on the demise of the Liberal party in the 1920s. The next couple of elections in the UK could see another revolution, and the union itself is no longer secure.

The general election in Germany takes place today and the expectation is that Angela Merkel's CDU party will lead the next government. Whatever its composition, a new Post-Brexit European political agenda will emerge over the next few months and the new French president, Emmanuel Macron, is due to make what could be an important speech on Tuesday.

Macron is already on the record as favouring a new push for EU integration, which translates as whatever the French and German governments are able to agree on. At the Dublin Economics Workshop conference in Wexford last Friday, Catherine Day, the former secretary-general of the European Commission, made a rather important point for Irish policymakers: there is more going on in Europe than Brexit.

It is perfectly understandable that Ireland should be focused on the consequences of Britain's withdrawal: after Britain itself, Ireland has most to lose. But the European project will move along and it could soon be heading in directions not favourable to Irish interests.

The treatment of this country during the uncompleted recovery from the financial crash has left deep scars on the relationship with the European Commission and the European Central Bank.

If a new Franco-German leadership is emerging to refashion the eurozone, vital Irish national interests are at stake, whatever the eventual shape of Brexit. The French president appears set on a path to closer eurozone integration if agreement can be found with the next German government.

Macron has already, in a speech in Athens a couple of weeks ago, spoken about the expulsion of the IMF from involvement in eurozone financial rescues, preferring a European Monetary Fund as some kind of sister to the ECB. If you think Ireland was well treated by, in the words of the 1916 proclamation, our 'gallant allies in Europe' during the Troika programme, you ought to feel relaxed about Macron's intentions.

If you are grateful that our saviours included some non-European folks from the IMF, you might pay special attention to whatever he has to say on Tuesday.

It is not in Ireland's interests that Emmanuel Macron, Angela Merkel or anyone else should be seeking to terminate Ireland's access to emergency borrowing facilities at the IMF.

With luck and a willingness to learn lessons, the country should never need the IMF again. But another financial meltdown is entirely possible and a small country which has abolished its independent currency is vulnerable in these circumstances.

It would be nice to trust our European partners to treat this country, and other small eurozone members, fairly if there is a next time. Experience suggests that we should love them, but not trust them.

Sunday Independent

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