Micheál Martin: “The contagion of political chaos will not spread here from London…”

So far from the feverish speculation in Westminster today, there was a more minor key play taking place in Leinster House this afternoon in a session called “Dáil Statements on European Council”.

Micheal Martin kicked off with a sobering assessment of the implications of the chaos in London, pointing out that “however good the deal is, a deal which will not or cannot be ratified ultimately becomes inoperable and worthless”.

Whether or not the deal is ratified, and there is still hope that this may happen, because of the damage which any alternative will cause, the risk of a no-deal outcome has risen dramatically.

He goes on to note that “circumstances have changed and we must respond accordingly…” A hint of what comes towards the end of the speech, which is that Fianna Fail is renewing its confidence and supply arrangement with Fine Gael for the whole of next year.

If the deal proves to be a dead letter, a no deal scenario hoves into view or a possible prolongment of the Article 50 period. Martin’s view is that Ireland cannot afford to plunge itself into the same chaos as the UK at such a critical moment.

Much of the early part of the speech lays out the economic vulnerabilities:

While past research has shown the medium and long-term impact of different Brexit scenarios this morning’s Quarterly Economic Review includes a study of the impact in 2019.

Using a very conservative approach it states that a no deal outcome will reduce GNP growth by roughly 1.4%.  That’s a loss of €3.5 billion in only the eight months following Brexit.

There’s the lack of preparedness in the face of a last-minute twist towards a disorderly Brexit:

…we have requested that the Minister for Finance publish details of the impact of a no-deal scenario, a rough estimate shows that a hole of at least €1 billion will open in the Budget figures for next year.

This will escalate in subsequent years.

The Government’s budget assumes an orderly Brexit, with a lengthy withdrawal period and no sudden shifts in policy.  Two months after the Budget his assumption is simply no longer valid.

In fact things could get much worse than this forecast suggests because it does not factor in a major devaluation of sterling or administrative chaos in the move to new systems.

Numbers for the damage:

Analysis by state agencies suggests that sterling devaluation is the biggest threat to many exporters – especially Irish-owned companies.

47% say they face serious difficulties at the exchange rate reached this week – with most of the remaining firms facing serious difficulties if the exchange rate falls a further 10%.

The hit to Irish business from Brexit-related devaluation is deep.  Since David Cameron announced the date for the referendum in 2016, Sterling has fallen by 25% against the Euro.

It really doesn’t matter how efficient or dynamic your business is, a 25% loss of competitiveness is enormous and is an existential threat.

But while apparently riding to the aid of the Fine Gael led government, Martin also accused it of significant failures:

The facts published by government show that only a minority of impacted companies have preparations in place.

Few have currency hedging strategies.  Few have begun procedures for essential freight travel registrations. Minor grant schemes are helping a minority of companies in small but important ways.

However significant funding for cash flow disruption, tackling loss of competitiveness and diversification has not been distributed.

The short-term loan scheme has allocated only 5% of its funding while the long-term loan scheme will not have distributed a single Euro by next March.

In effect though, the speech leads to the final reveal which is that Martin is preparing to sign up for another year of the confidence and supply deal. Because, well Brexit…

To replace this government requires a lengthy election campaign and most likely a lengthy period of government formation.

In 2016 this entire process took four months to complete.

Fianna Fáil is determined that the political chaos we see in London will not be allowed to spread to Ireland.

We simply do not believe that the national interest could in any way be served by taking up to four months during next year to schedule and hold an election campaign and then form a government.

With that, he announces that his party would sign up for another year of the confidence and supply arrangement, point out that a Northern Ireland style complete collapse is not an option for the Republic’s sovereign government:

We have all seen in Northern Ireland what happens when political parties undermine the functioning of government at a moment of critical risk.  Northern Ireland’s position has suffered dramatically from political game-playing and the absence of a democratic voice.

The majority in Northern Ireland and in the Northern Ireland Assembly want to Remain and also support the current deal.  Yet the absence of the Assembly and Executive has empowered people who believe the opposite.