UK Election May Be Our Cue To Consider EU Exit

Irish Director – Homeward Bound
April 8, 2015
NewsTalk Radio – The Wage Gap (14/07/2015)
July 14, 2015

UK Election May Be Our Cue
To Consider EU Exit

As David Cameron edges closer to a second term, and the UK to an EU exit, I fear that Ireland will be forced to ask itself an unexpected question that will define all our futures - is it time for us to go too?

These are not the happiest of times for the EU, nor for the euro.

The European Central Bank's much-vaunted quantitative easing has been seen by the world's markets for what it is - too little too late.

QE worked to revive the flagging US economy because they invested $3.5 trillion into the economy - an amount equal to that of the German economy.

In Europe we are talking about putting €60bn a month into buying bonds, which would, in theory, give the banks more liquidity.

However, the bottom line is that it worked in the US because it was done to such a massive scale - in my opinion, the EU will just be buying bonds which are a mixture of values and potentials rather than being gilt edged, as is the case across the Atlantic.

The sole aim of QE is to stimulate the economy - to invigorate the banks and get them lending.

What we all forget is that the ECB has already been lending cheap money to any bank that needs it - and have they in turn been lending?

The answer is no.

Just giving the banks more liquidity will not make them lend more money.

The sceptics may say that this is all smoke and mirrors to allow the EU's banks to pass the EU's own stress tests and is not going to create any material impact on any economy - except maybe Germany's, because there will be more cash floating around for people that can afford to borrow to buy the luxury goods that they export.

The beginnings of the stimulus plan has sent the euro tumbling to its lowest level against the dollar in a decade and pushed yields on some government bonds into negative territory.

The rising dollar, in turn, has opened the EU up to a slowly approaching tidal wave of high-priced imports.

Entire sectors, such as clothing and sanitary ware, are manufactured in the far east - and stories of cancelled orders and factory closures are starting to reach us from China, as Irish and EU-based companies try to cope with the unexpected 30pc differential from dealing in dollars.

While the seas are calm at the moment, we could be looking at rapid inflation in retail prices throughout these categories as goods being manufactured now hit the shops in the post-summer period.

Having cultivated the euro crisis by building a massive imbalance of trade, Germany has continued to lend its eurozone partners the money to buy its exports.

This has put Germany, supreme promoter of the euro to begin with, far ahead of everyone else in the EU - at least for the time being, since lopsided exchanges of value are inherently unsustainable.

The European Union was not conceived to produce short-term gains so some nations could prosper at the expense of others. On the contrary, it was intended to permanently transform the blood-drenched course of European history leading to a future of peaceful prosperity.

Well, at least the nations of Europe are not shooting at each other. Yet.

But, looking toward the western edge of Europe - to ourselves in Ireland - who in the European Union are most truly our partners?

Germany cannot be - not with its broad thumb pressed down firmly on the balance of trade.

Without question, Britain is Ireland's largest trading partner. It is also the EU's third-largest economy.

Yet the balance of payments between it and Germany is €2.89bn in Germany's favour. No wonder that the prospect of a British exit from the EU continues to be an urgent topic of debate.

If Brexit becomes reality, should Ireland follow the UK out of the EU and into a space that would most assuredly be filled by accommodating trade agreements?

Having lost the free trade advantages of the EU, UK companies post-Brexit would have a powerful incentive to build distribution centres in border counties in Northern Ireland, from which goods and even services would be transferred across the non-enforceable border to the Republic of Ireland, an EU member free to exercise its free trade with the rest of the European Union.

I say non-enforceable border because recent historical events could never see any form of restoration of a border between Northern Ireland and the Republic.

In this scenario, Ireland would become a de facto free-trade zone and thus enjoy significant job and general economic growth.

This would however be a short-lived experience -for we would have to question how long other EU members might tolerate the aberration of a member exploiting its non-border with a non-member.

This is the fear that I would have for Ireland's continuing future in the EU. For pragmatism, we may have to go with whatever the UK decides.

While not a Eurosceptic, I believe that we have to prepare for what may happen and act on the basis of political, cultural, and economic self-interest. We need to ask what independent step would best free us up to prosper politically, culturally, and economically?

While the UK is our largest trading partner, it does not follow that it is our most important economic and cultural partner. That title crosses the Atlantic.

The Irish diaspora in the US is roughly five times greater than the combined population of the Irish Republic and Northern Ireland.

More than 700 American companies, employing over 115,000 Irish people, maintain facilities in Ireland and most base their European headquarters here.

They are here for many reasons, not just the 12.5pc tax. They have an emotional attachment to Ireland as the gateway to the continent of Europe.

They know Ireland works and they are here because someone in a decision-making position in that company is Irish.

I work with a lot of multinational firms based in Ireland, and I have found this to be true every time.

This gives us comfort, because Ireland - if it chose to leave either the eurozone or both the eurozone and the EU - would not absolutely have to go it alone.

Given its compelling economic, cultural, and demographic ties to the United States, Ireland could solicit a special relationship with that nation through trade agreements.

I am not urging a departure. I am simply asking what if, because I regard the Greek scenario as the canary in the coalmine.

That this particular canary is presently faltering on its perch suggests that the oxygen is rapidly being sucked out of a German-dominated EU by the failure to implement a genuinely integrated fiscal union.

Add to that, the impending UK referendum and you have a perfect storm which may, at some stage, have us manning the lifeboats.

The trick will be to pick the one that is supported by the tide of Irish emigrants that can allow us to float calmly on and prosper.

We in Ireland are Europeans, but we are also Irish, members of a nation geographically located on the western frontier of the continent but politically located in a diaspora of minds, hearts, and heritage worldwide.