Tuesday, December 13, 2011

The sovereignty myth

Walk down any high street in Ireland and you will see the outlets of large companies that have their head offices in the UK, and who regard their Irish shops as nothing more than elements of their domestic chains. Some English Premiership teams have more Irish support than all home soccer clubs put together.

92% of Irish primary schools are under the management of an organisation that has its headquarters, and the formulation of its philosophy, in Vatican City, which is in the middle of another nation’s capital. Not too long ago a senior Irish politician could start a debate about whether, spiritually, Ireland was closer to Boston or Berlin.

It’s not entirely fanciful to believe that if “Coronation Street” were to be abruptly discontinued on Irish TV we would have rioting in the streets. Almost one hundred thousand Irish people receive their salaries from US companies established here, in return for which they happily embrace US corporate culture. This includes the understanding that they are expected to work without Trade Union representation, unlike their compatriots in indigenous industries, many of whom are forced to acquiesce to exactly the opposite condition in return for being vouchsafed a job.

None of the above facts has ever given rise to as much as a murmur about the fear of Ireland’s identity being undermined. Yet, when it looks like we are about to be the recipients of necessary fiscal discipline by certain countries with whom we freely entered into a monetary union, and who now want to save that union in order for it to continue in operation for our mutual benefit, we hear no end of bleating about how our sovereignty, no less, is being attacked and undermined.

As my American friends might say - give me a break.

Sunday, December 4, 2011

OMG! A new referendum

There is a growing expectation that there will have to be a referendum in Ireland on EU treaty change, to allow for shared decision making on budgets and taxation by the countries within the Euro zone, which is known as fiscal union. Up to now the Euro zone has only had monetary union, which has meant that member countries have ceded their powers to set interest rates or regulate the money supply to the European Central Bank, but were left free to decide on such matters as taxation rates and whether or not the national budget should be balanced.

For some, like the current government, the need for a new referendum is unwelcome news. It is likely to be divisive and there is no guarantee it will be passed. Because of the attitude of certain of our Euro zone partners, most notably Germany and France, it is looking likely that Ireland’s not agreeing to fiscal union could create serious issues about the actual survival of the Euro as a hard currency and / or the part that Ireland might play in a re-designed European single currency system.

Readers of Stack Six will be aware that we follow an enthusiastic European line here. It is not too much to claim that the development of the European Union and Ireland’s place in it have been the most significant macro events that have occurred during this writer’s lifetime, having been born just a few short years after the end of World War II.

It is easy now to forget the changes that were forced upon the Irish Republic as a condition of entry to what was then known as the Common Market, and which evolved into the European Union. Some examples include: the end of the rule that meant that women had to resign from all Civil Service and many other jobs on getting married; the repeal of legalised discrimination that existed against gays; an end to corporal punishment in schools; a ban on capital punishment; and a general requirement to abide by the anti-discrimination measures of the Treaty of Rome, which set the whole thing off.

Even the NCT car test, which has contributed, along with a zero tolerance for drunk driving, to a halving of the annual rate of road deaths in Ireland since it was introduced in January 2000 [the actual reduction between 1999 (413 deaths) and 2010 (211 deaths), is 49%], was only established in Ireland because of an EU directive. It is easy to argue that we would have moved with the times in regard to these matters anyway but our history does not give any scope for comfort in this regard – we needed that external stimulus.

All relationships suffer from time to time. Those that are worth keeping are also the ones that are worth working on when difficulties arise. Ireland’s membership of the EU falls squarely into this category. An important element of our association with Europe, and a highly desirable facility in its own right, is our use of the Euro as the unit of currency. It has given us significant trade benefits, a defense against speculative attack on what would be our own ‘soft’ currency if we were not part of a currency bloc, very low mortgage rates, elimination of currency exchange costs and risk for travelers and businesses in the rest of the Eurozone, pricing transparency for same, and an additional incentive for US and other foreign direct investment into Ireland.

All of that is worth holding onto.

Thursday, December 1, 2011

Martin Wolf on The Great Economic Crisis

Martin Wolf

I would like to share an article that appears in yesterday’s (Nov 30th 2011) Financial Times, by Martin Wolf, that paper’s chief economics commentator, and an associate editor.

To my thinking, this article encapsulates well where we are at the moment in terms of both Ireland and the global economy. Those whose job or inclination it is to look out for their particular national interests, especially politicians, need to understand that, no matter what their ideological position, we now live and work in a global economy, for better or worse. Actions that are taken or advocated without that in mind cannot make a useful contribution.

Two comments by Wolf stand out. They are

Fiscal indiscipline did not cause this crisis. Financial and broader private sector indiscipline, including by lenders in the core countries, was even more important.


Ireland can adjust as a small, open economy by displacing tradeable output elsewhere, where necessary. If Italy and Spain both tried to do this, they would be engaging in a costly and probably hopeless effort at beggaring their neighbours: costly, because the main way to do so would be to drive down wages via yet higher unemployment; and now hopeless, because the competitive advantage of Germany is so strong.

These stand out not because they allow us to further castigate bankers, builders and regulators, there’s been enough of that, but because they should provide confidence for those politicians and civil servants who are charged with guiding us through these stormy waters.

Wolf has convinced this writer that there is no easy answer to the current crisis. However, an understanding of what’s going on is a good place to start when looking for the solution.

Martin Wolf’s article can be read here. The link is to an online magazine in Australia (Business Spectator) which carries it. The Financial Times website sometimes requires registration, which will deter at least some potential readers.

This is an important article.