43% of Sinn Fein voters want to return to Sterling standard…

Mark Reckless is Tory MP for Rochester and Strood. He’s also the grandson of one Henry McDevitt, who briefly sat as a Fianna Fail TD for the now defunct Donegal East constituency. It seems Mr Reckless has taken it upon himself to commission a Red C poll on the question of whether the good folk of the Irish Republic would like to return to the calmer waters of the sterling zone. (H/T Gawain)

He has hosted the detailed report on his own blog site, and it contains some very interesting figures. 34% of the total say yes, let’s go back to a newly re-established Sterling Zone. But more interestingly (and this bears out something one of our readers – alias – has been floating over the last few weeks) some 43% of SINN FEIN voters want out of the Euro and back into Sterling.

Which, quite apart from anything deeper, suggests that Sinn Fein’s rise has been in part about their appeal to a rising indigenous Irish Euroscepticism, which views clubbing with the old enemy as distinctly more appetising than slumming it with Berlin…

His Grace will no doubt be delighted…

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  • pippakin

    This will put the cat among the pigeons…

    It does not mean loss of sovereignty and the old saying ‘better the devil you know’ could well apply.

    This subject came up on another thread and someone mentioned the Dollar as the preferred option.

  • There was a fairly well-circulated cartoon in the 1970s showing an anti-EEC march with Enoch Powell & Tony Benn arms-linked at the front with a motley crew behind them including various shades of Trot and Stalinist, Fascists and – if memory serves correctly – a banner with ‘IRA’ on it as well.

    The caption was ‘join the professionals’.

    So now, it’ll be Gerry and Martin with Dan Hannan, Richard Littlejohn, Rupert Murdoch, Nick Griffin and Bob Crow?

    Just like old times!

  • White Horse

    Many will see this trend as indicating little other than the Sinn Fein mindset, the little Irelander, really just wants to wreck what others have built because of deep insecurities about themselves, their identity and their values which promote the “us and them” conflict. They are at war with the Irish people and that is fashionable at the moment. It is natural that they will find friends and attractions in the British way.

  • joeCanuck

    It wouldn’t help. Euros borrowed will have to be repaid in Euros.

  • redhugh78

    Mick,

    ‘SINN FEIN voters want out of the Euro and back into Sterling.’

    Really? how do you come to that conclusion Mick when the question posed is –

    ‘In light of the current financial crisis, would you support Ireland leaving the Euro and re-establishing a link with the pound sterling, or not?’

    The question posed in full is open to some interpretation is it not?

    Some spinning to get from ‘leaving euro zone and establishing link to sterling’ to ‘joining a re-established euro zone.’

  • Henry94

    Has it slipped everyone’s mind that between the link with Sterling and the Euro Ireland had the punt. It was the period of time that saw the real Celtic tiger before euro membership turned it into a property bubble

    JoeC

    Leaving the euro means default. The foolish lenders will have to take their losses.

  • Mick Fealty

    Red,

    Fair criticism. Not the clearest question I’ve ever seen asked. But it’s not THAT ambiguous. Polls tend to simplify on specific policy areas, so I would not go further than I have done above.

    Henry, surely parity was broken back in the early eighties?

  • Mick Fealty

    Sorry, I see your point now. Night all.

  • I’m sure cross-border “enterprises” within republicanism would benefit from a common currency – no pesky questions at the forex counter of the banks, etc…

  • Sein Fein campaign for a no vote during the initial referendum on EEC membership (this was back in the 1970s). So they aren’t being entirely inconsistent here.

    However, they can’t be serious about the idea of joining a revised sterling zone.

  • Alias

    Actually, the Punt stopped being pegged to the Pound in 1979 when Ireland joined the ERM and the UK didn’t, and was pegged to Deutsche Mark for the last 20 years of its existence. The regime that Ireland had with the UK prior to the ERM was actually Dollarization, where one currency is interchangeable with another.

    Most currencies are not pegged floats but floated in either free or managed form, and there would be no need for a developed country to peg its currency. But if it was to be pegged, then pegging it to a commodity such as a precious metal that is stable long-term would make more sense than pegging it to a currency that fluctuates widely such as Sterling.

    As usual, political agendas seem to take precedence over economic agendas to the detriment of the economy. We just got ruined within one political project, and I see no reason to get ruined again within another political project.

    The time now is for ruthless national self-interest, not quisling shenanigans from either Europhiles or anglophiles that masquerade as other.

  • Prior to 1979, Ireland operated a currency board. However, there was a general consensus (post-1979) that the arrangement didn’t work particularly well for Ireland. Although, the Irish economy is closely connected to Britain, it also has interests beyond its nearest neighbour. Monetary independence, on the whole, worked well for Ireland.

    In fact, the decision to join the euro was positively mad.

  • Cynic

    And it would add an exchange rate risk to the existing mess. Its a vote for any port in a storm

    However, you never know. Perhaps Sinn Fein could redefine Nationalism to include the whole of the British Isles and push for a new United Kingdom. Fanciful perhaps, but not that much further than what SF sold to Nationalists in the North

  • Itwas SammyMcNally whatdoneit

    Dony know how much this type of poll costs but often wondered why Republicans dont commission one in Britian about British attitudes to their involvement in Ulster.

  • Comrade Stalin

    It was the period of time that saw the real Celtic tiger before euro membership turned it into a property bubble

    Come on Henry, you’re smarter than this. You really believe that had Ireland remained in the punt, the Central Bank would have kept interest rates substantially above those of Europe, the UK and the USA ? You are aware that if this had been done the Punt would have strengthened against all three of the above currencies to the point that Ireland’s export market would have become disastrously incompetitive ?

    Staying out of the Euro worked out real well for Iceland.

  • Comrade Stalin

    Leaving the euro means default

    Why ?

  • Mick Fealty

    Alias,

    Would you mind doing a piece for us on precisely that subject?

  • Laughing (Tory) Unionist

    Before this Hannan-inspired balls goes any further, it’s not going to happen, *not* because the Anglophobic (or otherwise) population of the Republic doesn’t want it, but because sensible Britain won’t wear it. For how exactly is it in *our* interest to tack the Free State onto Sterling again? By all means we should give them emergency aid, as we’re doing, by providing for a loan the capital markets won’t give them (nb if they default a la Argentina, they’ll not be getting into the capital markets for decades – Argentina hasn’t returned to them since her much vaunted default: don’t do it kids), but why should we saddle sterling & the UK with the South’s problems? What’s in it for us? They’ve made the choice to be separate (or the 17th lander): let’s respect that and stop patronising them with this risible suggestion that any British government under any circumstances whatsoever would take back on its books a state with East German economic prospects and Mexican political standards.

    Full confession time: I still regret ’79 (when the sterling link was broken, by the South, in favour of the ERM), but having made that mistake then, Dublin’s going to have to live with the consequences now. And while they’re not going to be pleasant, let’s junk this absurd talk of running to mother: the Republic’s quite grown-up enough to realise that she has to sort her problems out herself. That Sinn Fein’s momentary spasm of Southern voters are exactly the infantile fools who think otherwise really should come as no surprise. Northern Republicans and Southern ones may have, for them, painfully little in common, but they’re forever alike in their persistent fantasy and unreality.

  • Greenflag

    Irish Labour was actually against Ireland joining the EEC but I don’t recall that anybody in Irish Labour or FG or SF ever going on record as being against joining the Euro .

    Hannan is a neo con [text removed – play the ball!! – mods] 🙁

  • another

    Ireland is caught in a debt-default spiral, which would not have come about had it been able to devalue its currency, as per the Icelandic example (the krona was devalued you by 60% against the Euro).

    Time will tell that the least worst option for Ireland remains an exit from the Euro, the creation of a new punt pegged to sterling and the cancellation of all overseas debt, which would otherwise be revalued upwards on the back of a Euro exit.

  • Neville Bagnall

    If I’m not mistaken that report includes the full demographic breakdown of the Sun RedC poll. Not aware of that being available elsewhere?

  • ProgressiveUnionist

    Itwas SammyMcNally whatdoneit says:
    6 December 2010 at 9:09 am

    Dony know how much this type of poll costs but often wondered why Republicans dont commission one in Britian about British attitudes to their involvement in Ulster.

    ———————————–

    britsocat.com do a survey every year asking exactly that.

    Here’s the results since 1983:

    http://alturl.com/uvcad

    Seems they’re more than happy with us these days! 🙂

  • anon

    I’m not sure a peg with Sterling would make a blind bit of difference to the UK, one way or another. Ireland could peg to the Yen, if it so choose. The rouble used to be nominally one pound, IRC.

    Looking at the question, I suspect anything starting with “leaving the euro” could have got SF support, and a significant amount of other support. Without another question, its very hard to fit this in context.

  • anonymous

    >This subject came up on another thread and someone
    >mentioned the Dollar as the preferred option.

    Potential disaster. The US dollar will have to fall significantly to correct the huge US trade deficit. This will likely happen as soon as there is a US gov with the political will to preside over it. If there is a return to total Republican domination in 2012, that may be the time. In any case, it would put a small dollarized state with huge Euro debts in a disastrous position.

  • T Runner

    I think the Euro can be good for Ireland.

    The problem wasnt in joining the Euro the problem was in not containing inflation after we joined and in the government not understanding the implications of joining such a monetary Union.

    A split in the zone with a devalued area is likely. Ireland needs to push for a smaller monstary and fiscal zone. There is no reason why we cant live with Germany, France, Netherlands and Austria in this fiscal zone.

  • Neville Bagnall

    Membership of the Eurozone put us in a sweet-spot from the perspective of FDI (particularly US FDI). We removed the currency exchange risk for trade with the main sales region, sent a strong signal of alignment with the European (read German) economy (which I’d argue we failed to follow through on), increased our competitiveness, lowered our public debt and we had an educated, anglophone workforce. For native exporters we had those benefits plus (until recently) cheap financing.

    Dropping out would risk us falling between two stools. The UK which is also english speaking, has better infrastructure and lower costs, but higher corporate taxation; and the Baltic periphery which is, or soon will be, in the eurozone, has capable english speakers and in some countries a cost and corporate tax regime that compares well with our own.

    As has been pointed out elsewhere, our industrial policy has been based on FDI and low corporate taxation of exports since the 1950’s. Without FDI we would add a negative balance of payments to our huge debt problem.

    We got into this problem by being insular, prideful and reckless. Lets recognise that any solution will have side effects, most of which will be negative. We need to find the route out of this mess that minimises the damage. And not just to ourselves. One big side effect that needs to be quantified is what effect default or euro withdrawl would have on FDI.

    We are in the midst of this crisis right now and the agenda is clearly to save the Euro. If Ireland defaults now, either inside or outside the eurozone, that gets much harder. Things probably get pretty sticky for the UK banking system too.

    Right now there is a big lump of toxic debt floating around in the inter-bank market (both eurozone and wider afield). Ireland managed to create exposure for German, French, British and Belgian banks equal to about 5% of their GDP. Heaven only knows what percentage Spanish and Italian debt represents. It will eventually mature and will not be renewed, now that national factors are being priced into loan rates and asset valuation.

    It looks to me like the ongoing process is aimed at transferring the bad debt that has attracted attention into inter-sovereign loans. This purges the market of the toxic debt without causing a domino effect in the inter-bank market. The longer this takes the better, as bad loans can be gradually written down, and more of the bad debt can be purged by normal market forces rather than by sovereign intervention. Nibbling away the problem rather than swallowing the doughnut whole.

    It would be nice to think that once the process is complete a mechanism will be found to forgive or restructure the sovereign debt. It would be even nicer to think that the Irish Government was amassing the necessary facts to lay before the politicians and electorates of Europe when the risk of contagion has passed (if it does). It would be nice to think.

    Ireland is incredibly exposed to the health of the world economy. If we can’t export we are in trouble. If we haven’t FDI we are in trouble. If the eurozone collapses the odds are high we are going to be in a lot of trouble, even if we default or devalue the debt.

    The mistake is not being in a currency union. When Britain represented 60%+ of our trade, a currency union with the UK made a lot of sense. It still makes some, but less. With a eurozone targeting FDI sector euro membership makes a lot of sense. If it survives the current crisis, it will probably make even more. Even running an independent currency targeting a basket of currencies makes sense, even more so if we had a large native export sector. Each have benefits and costs. But all three require industrial, monetary and fiscal policies that reflect the choice and maintain competitiveness. That is where we have fallen down. Until we demonstrate an ability in that area, the colour of our money is no solution.

    The harshness of our bailout has failed to stem the contagion, if anything it has increased the skepticism of the markets. It increasingly looks like they will not be satisfied until the eurozone has passed the crisis point one way or the other, and the Spanish, Italian and most importantly German question has been settled.

  • John East Belfast

    I have been floating the ROI leaving the Euro for Sterling on here for the last year now.

    My reasoning has been the ECB Interest Rate policy and the fact that Euro Interest Rates are going north much earlier than the UK – indeed I feel the EU inspired bail out last week is in anticipation of the Residential Mortgage Tsunami engulfing ROI Banks as soon as the ECB starts hiking up interest rates.

    Basically German requirements will dictate ECB monetary policy and the ROI will be stuffed.

    The alternative is to leave the Euro – of course assuming that could be technically done.

    the problem of course is if the Punt was resurrected it would fall like a stone. The ROI would then be faced with the nightmare of Punt Assets but Euro Liabilities and would be crucified.
    It could of course try to re-designate its liabilities in Punts – which in effect would be a massive default.

    However is there a middle way – ie Sterling ? –

    Sterling will provide the ROI with a floor and at the same time will give them a monetary policy much suited to the ROI economy of Financial Services and a high proportion of domestic home ownership – ie the UK Economy – with a UK Interest Rate the ROI Economy will have more time to recover.

    The ROI’s liabilities will still be in Euros of course – but redesignation from Euros to Sterling will be more palatable to Bond Holders than Punts. Indeed one could argue if Sterling may actually be a long term bet against the Euro with Spain, Greece et al continuing to drag it down. Under such a scenario the ROI liabilities would actually decrease in monetary terms.

    If STG remained weak then the ROI would be able to export it way out of it problems.

    After many years and new stability, if the ROI was still obsessed with sovereignty, it could resurrect the Punt and detach from sterling. Basically Sterling is a steping stone from the Euro.

    Either way the Euro and ECB Monetary Policy is not what the ROI needs at present.

    However as LTU points out above – why would STG have it back ?

  • Eurosceptic englishman

    John East Belfast
    “However is there a middle way – ie Sterling ? –

    Sterling will provide the ROI with a floor and at the same time will give them a monetary policy much suited to the ROI economy of Financial Services and a high proportion of domestic home ownership – ie the UK Economy – with a UK Interest Rate the ROI Economy will have more time to recover.”

    Whilst I accept that Ireland has effectively handed its fiscal and monetary soveriegnty Frankfurt, surely that is more acceptable to the Irish people than giving it to London?

    I doubt that it would be particularly acceptable to the English as there would be massive incentives to switch foreign investment from the English mainland to lower cost and lower tax Ireland.

  • Greenflag

    JEB ,

    Your rationale above is sound enough from a currency /economic perspective .Politically not a runner in the near term . I would guess that any non -eurozone options will have to wait until such time as Spain is ‘bailed out’ and or the Eurozone is divided into a two tier system . Some 80% of the UK’s exports are with the Eurozone countries and the trade dependency that existed between Ireland and the UK as late as the 1980’s is now past tense .

    I’m not saying a return to the sterling area is never going to happen just that whichever government is elected will I hope spend a bit more time considering all the options and as many of the consequences as possible before they repeat any more ‘absolute guarantees’ to banks and debt loads they appear to have underestimated . Tomorrow the scalpel will be out so – hairshirt donning time 🙁

  • John East Belfast

    Greenflag

    “.Politically not a runner in the near term..”

    Are you sure ?
    For starters what is the alternative – can you imagin an EC Interest Rate of 3% this time next year ?
    – and my goodness if SF can find themselves up for it then what would the political obstacles be ?

    Nobody would be under any illusion that this was going back to Perfidious Albion – just a pragmatic exit and stepping stone

  • Geneve

    Complete tosh..there is no chance Ireland will dump a global currency to be linked to a minor currency.

  • John East Belfast

    Geneve

    What not even a global currency that has contributed to bringing their economy to its knees – by the availability of too much cheap credit and the wrong monetary policy at the wrong time ?

    Especially with the stake to the heart being the 2011 German required Interest Rate rises ?

    Unless you feel Sterling was going to fall as much as a New Punt then I am not sure of the other options – and if Sterling did you would be seriously screwed anyway considering your UK land border and resultant imports.

    The bottom line is you never should have joined the Euro as you arent big enough to exert influence over its monetary policy (although you could collapse it by your debt !) and at the same time your economy does not mirror the major players either.

    You have more in common with the UK economy and its future independent monetary policy

  • Greenflag

    Jeb,

    Sure ? Nobody can be sure of anything in these . Having read half a hundred tomes from all sides of the economic spectrum and every blasted economist ‘expert’ I’ve come reluctantly to the conclusion that they are still mostly adrift on the sinking ship ‘anarchic capitalism ‘ or perhaps more accurately ‘anarchic international financial markets ‘ . I’ve never been keen on SF’s economic policy decision making much less currency or monetary policies in the past and although they seem to have been tamed somewhat in the NI Assembly context, it’s early days yet before voters in the Republic would grant SF’s economic spokespersons the gravitas of say the utterings of FinanzMinister Schauble in Berlin .

    Perfidious Albion’s ‘perfidious days’ are behind her and we Irish await Brittania coming fully the to terms with new worldwide economic and political realities probably more so than herself awaits ours .

    The line of countries lining up to join the Eurozone continues to grow . The line for joining the sterling zone is somewhat muted at present and I don’t believe the Irish lining up to rejoin would at this point be of benefit to sterling . That sleeping dog will have to lie until the current chaos passes assuming it does pass and more is not engendered by Spain, Italy, Belgium etc .

  • John East Belfast

    Greenflag

    I just interpreted your “politcally” not a runner as being more to do with the fact that it would be simply unpalatable to the ROI voter for a return to Sterling due to their “emotional” opposition to all things British.

  • Comrade Stalin

    John :

    What not even a global currency that has contributed to bringing their economy to its knees – by the availability of too much cheap credit and the wrong monetary policy at the wrong time ?

    Why do you think that not being in the Euro would have made this any different ? All the non-Eurozone EU countries followed the same low-interest monetary policy.

    The bottom line is you never should have joined the Euro as you arent big enough to exert influence over its monetary policy (although you could collapse it by your debt !) and at the same time your economy does not mirror the major players either.

    Monetary policy control is looking like a bit of a myth to me. The western world has followed more or less the same policy for the past 20 or so years.

  • John East Belfast

    Comrade

    Generally accepted wisdom is that during key period in the noughties the ROI had the wrong interest rate – too low and if the ROI had the Punt they would have cooled the boom with a higher rate.

    There is an academic who writes on this stuff and there is a Law after his name on the true interest rates for countries which he has mathematically derived. I cant recall his name but i will see if I can dig it out later as I cant get access to it at the minute.

    However as a general rule you need to be very careful about giving up control of your interest rate policy unless your economy is going to mirror the standards set by those who will effectively dictate what that rate will be.

    As a consequence the ROI is faced with having too low a rate when it needed a higher one and (next year) too high a rate when it needs a low one.
    In addition as they cant devalue their currency they cant export their way out fo the problem either.

    Regards all countries trying to exercise strict control of monetary policy and aim for low inflation that is true – however the problems with monetary union is that not all economies therein will be at the same stage of the infaltionary cycle.

    Convergence was a myth.

  • Comrade Stalin

    JEB, having the freedom to change your interest rate is one thing; having the political will to do so is quite another, and I see no evidence supporting the case that the property boom could have been avoided by RoI staying out of the Euro. Had the political will existed to do so, there are plenty of ways the RoI government could have acted to throttle back the property market. Given the fact that they did not do so – indeed they structured the tax system to encourage property growth while simultaneously increasing the proportion of public funds derived from it – I see no reason to believe that they would have acted to set their interest rates anywhere other than the lowest level possible.

    Leaving aside the independent rate, a wide gap between the Irish rate and the rates of its neighbours would have kept the borrowing rates on the capital markets lower and Irish banks would still have raised their funds there.

    And yes, convergence works just fine. The whole idea of the Euro is based on the arguable success of the dollar in the USA. You may well be aware that parts of the USA, eg Las Vegas in Nevada, are suffering from the same problems as the RoI – entire new-built housing developments and apartment blocks lying empty.

    The idea that Ireland would have stood alone in the western world, staying out of recession and debt while Europe, the UK and the USA all suffered, is the real myth here. It’s beyond credibility.

  • John

    The Irish Republic of Brussels owners in the EU will never allow that.

  • John East Belfast

    Comrade

    The name I was looking for was Taylor – using “The Taylor Rule” in Jan 2005, Rossa White of Davy’s (Irish Stockbroker) concluded that the effective EMU Interest Rate stimulus for ROI had been 3% to 7% over the period.
    Remember Germany at that time was still intergrating the East and needed a lower rate.

    ” having the freedom to change your interest rate is one thing; having the political will to do so is quite another”

    On the assumption that the Irish Central Bank would have followed the trend and been independent from Govt then one may have hoped they would have taken their task seriously.

    “Leaving aside the independent rate, a wide gap between the Irish rate and the rates of its neighbours would have kept the borrowing rates on the capital markets lower and Irish banks would still have raised their funds there”

    What you would be doing there is introducing a serious currency risk – it is not a good idea to borrow in somebody else’s currency just to get a lower interest rate – a lot of ignorant UK people did that a few years back when the Euro was £1 to EU1.5 and UK & Euro Interests rates were very much in the favour of the latter and bought Sterling assets with Euro Loans. With the 25% appreciation in the Euro since then they have been seriously caught out.
    The same has happened in Poland where the vast majority of residential mortgages are in Euros as the Poles were exepecting for the Zloty to merge into the Euro.

    “The whole idea of the Euro is based on the arguable success of the dollar in the USA.”

    The USA is not Europe for lots of reasons. However the most important is that despite the independent State taxes they are negligible to Federal Personal and Corporte Income taxes – there is no European IRS – not yet anyway – although many believe that such Fiscal Union is really required for a fully functioning Monetary Union.

    “The idea that Ireland would have stood alone in the western world, staying out of recession and debt while Europe, the UK and the USA all suffered, is the real myth here. It’s beyond credibility”

    It wouldnt have been as bad – it is beyond credibility you cant see that actually.
    There wouldnt have been as much Euro Credit available (without currency risk) and Interest Rate policy would have been higher for longer. I am not saying there wouldnt have been an asset bubble – just not as severe

  • Comrade Stalin

    JEB,

    I’m not a fan of the idea that policy, or behaviour, can be determined by a mathematical rule. There are plenty of precedents that this approach can go spectacularly wrong, in spite of Nobel prizes being awarded.

    On the assumption that the Irish Central Bank would have followed the trend and been independent from Govt then one may have hoped they would have taken their task seriously.

    What, like the Bank of England did ? Like the Central Bank of Iceland did ? Back then nobody thought this was wrong.

    What you would be doing there is introducing a serious currency risk

    You’re not seriously suggesting that people at any point up to 2008 were taking a sober consideration of risk ? You seem to think that Ireland having an independent currency would somehow have come with a completely different mindset.

    The USA is not Europe for lots of reasons. However the most important is that despite the independent State taxes they are negligible to Federal Personal and Corporte Income taxes – there is no European IRS – not yet anyway – although many believe that such Fiscal Union is really required for a fully functioning Monetary Union.

    I don’t think a common fiscal policy would be workable at all. Then again, a common fiscal policy doesn’t apply in the USA. Different states have vastly different levels of state involvement.

    It wouldnt have been as bad – it is beyond credibility you cant see that actually.

    You haven’t presented a compelling case for your argument. The points that you have made appear to be based on the assumption that the single currency somehow dramatically influenced people’s attitude to risk. Like I have said, noting other Western countries in trouble, the argument doesn’t hold.

    There wouldnt have been as much Euro Credit available (without currency risk) and Interest Rate policy would have been higher for longer.

    OK, so why didn’t the interest rate policy lead to vast property bubbles in other European states ? It’s nothing to do with interest rates.

  • SteveD

    The Irish are the only western nation that actually votes with their feet. Count the feet, divide by two and estimate the number of parents, siblings etc. who will miss their kids, siblings etc. Then calculate the effect on the electorate, Gerry Adams, your next Prime Minister, obviously has.

  • John East Belfast

    Comrade

    I think you will find that the “Taylor Rule” is pretty well accepted among economists and central banks as a good tool in setting Interest Rates in the fight against inflation – hey but if you think it is crap then it must be !

    “What, like the Bank of England did ? Like the Central Bank of Iceland did ? Back then nobody thought this was wrong”

    The BOE did have a high interest rate during that time – i dont know about Iceland. However we arent talking about the rest of the world – we are talking specifically about ireland and its banks and its property industry – what went on in Ireland the last 10 years was uniqe to those circumstances.
    The availability of cheap and abundant Euro credit fuelled the problem – that is just common sense

    “I don’t think a common fiscal policy would be workable at all. Then again, a common fiscal policy doesn’t apply in the USA. Different states have vastly different levels of state involvement”

    As I said the Federal Govt and its Federal Taxes are far more significant in the USA compared to the State taxes – in Europe it is the other way around – indeed more so as there are no Federal European taxes – The USA with the $ is no comparison to Europe and the Euro

    “The points that you have made appear to be based on the assumption that the single currency somehow dramatically influenced people’s attitude to risk.”

    That is not my assumption at all – you seem to be confusing what I said about currency risk – What I am saying was there was too much credit chasing too few investment decisions. By joining EMU the ROI opened the proverbial shed door to credit – that isnt hard to comprehend

    “OK, so why didn’t the interest rate policy lead to vast property bubbles in other European states ? It’s nothing to do with interest rates”

    Because they arent Ireland – the desire for every farmer to become a property millionaire isnt shared for instance by the Germans and French.

    However if you look at the 4 guilty parties
    Banks, Govt, Regulators & Property Developers

    Gettting that perefect storm of incompetence and corruption was a uniquely Irish achievement

  • Alias

    “Would you mind doing a piece for us on precisely that subject?” – Mick Fealty

    The re-emergence of Irish euroscepticism benefiting Ireland’s only eurosceptic party or the advantages of a sovereign currency? If the latter, I’ll see if I can avoid quasi-ranting and overlong analysis of obscure details and e-mail something to you in the next few days. If it is no use, feel free to delete it.

    John East Belfast, you’re forgetting that Sterling was also pegged to the Deutsche Mark when it was in the ERM so Sterling isn’t a benchmark currency.

  • Neville Bagnall

    JEB,

    You are right that the availability of cheap credit contributed to the asset bubble, but the interest rate is not the only lever controlling the availability of cheap credit. The Government and financial authorities still had plenty of fiscal and yes, monetary instruments to limit the banks ability to lend. And thats before you even get started on the demand side policies that were pro- rather than counter-cyclical.

    Further, it was not the ECB rate, but rather the ratings achieved by the Irish Banks and Corporations on the markets that saw credit flow into the country including $131bln from the UK, despite its being outside the eurozone. Yes being a eurozone member improved those ratings, but so did a booming economy and the (almost) universal relaxation of financial regulation and credit restraint post 9/11. Remember, Irish Sovereign Debt fell during the boom and bubble. This is a private sector catastrophe.

    Is it easy to stop an asset bubble? No. Its damn hard. But politically, monetary union should make it easier to make the case for counter-cyclical policies, as competitiveness comparisons are easier to make. That does not guarantee that the electorate will make the best long term decisions, but it should have been a major part of the debate. It wasn’t. That is a political and societal failure, not an economic one.

    No matter which way you turn it, we were the leading actors in this drama, the euro only had a supporting role.

    As for the alignment of the UK and Irish economies. Take a look at the balance of trade for the Irish, UK and German economies for the last 30 years and tell me who we are more aligned with. Both Germany and Ireland are exporting nations. The UK is not.

  • John East Belfast

    Neville

    I am not saying the Euro is the sole responsibility for the Irish property boom.

    However to me it is a bit like the responsibility the Bride’s father has to bear for the drunken bust up at the end of the wedding party because he provided a free bar all night – especially when all the Irish cousins turned up

    “As for the alignment of the UK and Irish economies. Take a look at the balance of trade for the Irish, UK and German economies for the last 30 years and tell me who we are more aligned with. Both Germany and Ireland are exporting nations. The UK is not.”

    Germany is an industrial and exporting power house of that there is no doubt. However you need to look more closely at the ROI’s Exporting statistics to notice that it is not an indigenous exporting country – apart from food products – which it is damn good at. If those multi nationals up and run for whatever reason the ROI will be stripped back to the bone – that is why the low CT rate is so important.
    As for the UK that our manufacturing took a hammering in the mad days of Thatcherism is true – however the UK offers the critical mass to re-ignite any time the Govt find the right policies and long terms I firmly believe the UK’s industrial heritage will return

    Alias

    “you’re forgetting that Sterling was also pegged to the Deutsche Mark when it was in the ERM so Sterling isn’t a benchmark currency”

    That was nearly 20 years ago and of course was a complete disaster. However I am not saying the Punt pegging to Sterling – I am saying the ROI Swap the Euro for Sterling

    Eursceptic Englishman

    “I doubt that it would be particularly acceptable to the English as there would be massive incentives to switch foreign investment from the English mainland to lower cost and lower tax Ireland”.

    True – but that is already the case – but yes the same currency would make it much easier. However I am not sure about the “lower cost” – there are many parts of the UK that are cheaper than the ROI – including the other part of Ireland

  • Coll Ciotach

    Cannot see it happening – they learnt the lesson of 19 November 1969.

  • Macca1874

    There’s as much chance of Irish people wanting a link up with the UK’s financial system as there isof the UK wanting to link up with the Continent’s financial system.

    Irish people won’t link up with the British for the same reasons as the British won’t link up with Europe: they are culturally different, deeply suspicious of the political motives of the nighbour and -ultimately- are separated from them by water. That’s just the way it is.

    I sympathise with Northern Unionists posting here, but if you are peprlexed as to why the Irish don’t like the notion of hooking up with the British simply ask your nighbours in Great Britain why they have never wanted to hook up with Europe…the reasons are very similar and understandable.

  • Macca1874

    …although maybe the UK might fancy hooking up with the Irish and joining their New Punt project?

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