I don’t always see eye to eye with the Guardian newspaper. For one thing, their line between comment and news is often a little too blurred for my tastes [But you run a bloody blog! – Ed] Yes, but, well I’ve come to praise the Grauniad, not to bury it. Those of you who’ve been following Pete’s tight commentary on the Euro crisis, will have noted frequent references to their Eurozone crisis live blog.
That blog has done almost exactly what we, from time to time, have done as well or better than any mainstream newspaper in Ireland or Britain. And that is to build a layered understanding of complex issues (or in Northern Ireland sometimes not so complicated issues) by frequent revisiting and carefully revisiting past notes over time. This is what Pete, in his more fanciful moments [Pete, fanciful? – Ed], calls Baconian history.
It is this careful documentation of even the minutest detail of the crisis that builds to this cracker of a leader on the dilemmas facing Ireland, whether they say Yes or No (Ta no Nil) to the fiscal treaty (a document only its own German mother could love). If I have that paper’s indulgence for the moment, it is well worth quoting in full:
Right up there with the Yugo, Zaporozhets and Moskvitch, the EU’s fiscal pact must rank as one of the worst vehicles on the road. It’s lethal not only for its occupants but other road users, it’s got an oil leak and probably no brakes. Would you hitch a ride in one, if it lurched to a halt in front of you? That’s the choice facing Irish voters in a referendum today.
The case for not getting in is persuasive. Despite the promises of its driver, it is almost certainly not taking you in the direction you want to go: banks whose debt burden is unmanageable but for which taxpayers still have to pay; weaker economies with higher unemployment; falling revenues. As economic horizons shrink, the periphery feels it first. Look at what is happening to jobs in the centre of the eurozone. French unemployment is at a 12-year high and continues to edge up. The CGT union handed France’s new centre-left government a list of 46 companies that were planning to cut production sites, threatening 45,000 jobs.
The hope that the private sector will make up the slack caused by public-sector cuts on a continental scale is for the birds. In patting Ireland on the head for its prosecution of its bailout programme and forecasting that export-led growth in Ireland would pick up to 1.9% next year and nearly 3% by 2015, the EU commission conceded this would only be possible because of the “considerable spare capacity in the economy”. The Irish economy has to contract further before it can grow, but still remains vulnerable to the risk of “unfavourable developments in the euroarea”. That means the airbags aren’t working either.
Staying by the side of the road is hardly more appealing. If it votes no, Ireland will still draw on its €85bn bailout and there was a major debate during the campaign about whether it would be denied access to the successor fund, the European Stability Mechanism. With a domestic economy on a crash diet, caused by both a deflating property bubble and deep spending cuts, Ireland’s return to the markets after 2013 when the bailout money runs out is likely to be a bumpy one. It could well need more EU help. Would it risk that by voting no?
Further, last year was a record one for inward investment, creating 13,000 new jobs. This is largely because of Ireland’s continued attraction for multinationals. Last year foreign companies accounted for 70% of Ireland’s total exports, paid €6.9bn in salaries, €2.8bn in corporate tax and spent €19bn in the economy. Those are big figures in an economy Ireland’s size and no coalition government is going to risk them. But investment too would be at stake in the absence of a credible plan to deal with this debt. The alternative could be a bank run. A successful €3.5bn bond swap in January was taken as a vote of confidence by private investors.
It comes down, as the Centre for European Reform said, to a choice between fear and anger, both negatives. Of course the car could change course and stop for a service on the way. That is the least likely option at the moment, because it would mean German taxpayers, who already believe they have gone through their years of pain, going through a few years more. Whether it’s her fear of inflation, the experience of unification, or a steadfast refusal to abandon the economically flawed “good housekeeping” model, Angela Merkel is more likely to wait until the car itself breaks down. That will be if, or when, Greece leaves the euro, the firewalls are in place and the future dawns a slimmer, safer eurozone.
The European ideals that Irish voters are being called upon to summon today will soon enough be subsumed by national ones in the stronger northern European economies if push comes to shove.
Fear might well win the day in Ireland: no one knows whether a Greek exit would be a blip on the screens or another Lehman Brothers. But if the firewalls are not as thick as they are cracked up to be, would Ireland be the next point of contagion? The Germans need to get a signal, but would your economy be the one wanting to send it ? It’s hardly a great choice.
I particularly liked that subtle kickback against the great liberal hero of the anti austerity lobby, the Nobel Laureate Paul Krugman, who yesterday urged Ireland (as suicide bomber, after Naoise) to send a signal to the Germans by voting No…