Today Senator Paschal Donohue rises to Stephen Kinsella’s challenging essay (LE5) makes a case that actually a Yes or a No does have the capacity to influence Ireland’s economic future. The result either way, he argues, will affect two crucial factors: confidence in those who will be asked to shoulder the country’s substantial and growing debt; and the potential for the country to continue to attract FDI if and when the ‘faucet’ resumes its flow. He argues that a No vote can only increase uncertainty, and add risk (and cost) to the investor’s calculus.
By Senator Paschal Donohue
Everyone in Ireland is an economist. Or so it seems to me. Everyone I meet has a view on our economy, the future of it and what must be done to save it.
The reality of rising unemployment and the prospect of profound changes in government spending and taxation have ignited fierce passion and debate.
It is therefore inevitable that the decision on the Lisbon Treaty be viewed through the prism of its effect on the economy. This is not only inevitable in such time of uncertainty and distress but – despite Stephen Kinsella’s literate assertion to the opposite – it is also correct.
It may be true that a ‘Yes’ or ‘No’ vote has only a marginal effect (See LE5) on jobs and economic growth but in the midst of an economic depression these ‘marginal’ effects make all the difference to the prosperity and security of a small open economy integrated (See LE3) with the world economy.
It is this very integration process which provides a key reason for voting ‘Yes’. When Ireland is integrated into a growing European economy, we do well. Voting ‘Yes’ re-affirms our desire to keep doing this.
We can be sure that a ‘No’ vote will reduce, absolutely and over a period of time, levels of integration with our neighbours. It will plunge political leaders into an eternity of internal negotiation at a time when the only ‘game in town’ should be using European agreements to create next generation jobs.
Two factors will have a decisive effect on our future economic growth. They are confidence and investment.
Firstly, how confident international investors will be in supporting future Irish borrowing. Secondly, the effect on investment in our country by Irish and internationally owned companies.
So how will a Yes or No vote affect either?
Currently, Ireland is looking to borrow at least €150 billion on the international money markets over the next few years. This during a time when nearly every other developed economy will be trying to service very high government deficits of their own. The well will be crowded when we go looking for water.
International investors want to be certain that small economies like ours sustain the support of the community with which they trade; and the EU is, by far, Ireland’s single largest export trading partner.
A ‘Yes’ vote is more rather than less likely to sustain investor confidence.
Why? Well for a start, how can a ‘No’ vote possibly increase this vital confidence? At best, it will stop a forward-moving plan agreed by every European government. At worst, it will cause this plan to unravel.
If this unravelling occurs it is hard to see other European leaders re-affirming their support for our national priorities in the following negotiations. This is a recipe for lower confidence in our country.
A drop in confidence that will cost the tax payer more as we struggle to borrow and are forced to pay higher rates of interest for those borrowings we do manage to secure.
A similar pattern exists regarding investment.
Paul Relis of Microsoft Ireland states “I am convinced we would lose investment to other countries in the European Union if this referendum was to lose”. The Irish born General Manager of Intel, Jim O’Hara, also advocates Lisbon support.
Ireland being at the centre of Europe has helped Irish exports grow from €3.2 billion to €88.6 billion. With a ‘Yes’ vote we retain this position. This can only help. A ‘No’ vote and ‘the centre of Europe’ will shift away from Ireland. This can only hurt.
There are no certainties in this debate, only the evaluation of potential consequences. A ‘Yes’ vote offers certainty on institutions to lead Europe, within which we have a strengthened position. A ‘No’ vote offers uncertainty, as nobody really knows how Europe will respond.
How can this possibly help a country that is, of itself, looking for help?
Tomorrow Conall McDevitt is the first of several essayists to respond Nigel Farage’s call yesterday for Irishmen and women to look to their own national interest and call a halt to the Lisbon experiment…