Let’s don the green jersey for a few minutes and talk about Ireland’s interests. And let’s talk goal congruence, and whose interests coincide with ours. Over the past week, we saw very clearly who the main losers in a no-deal Brexit scenario would be. It would be us, and the UK.
Leo Varadkar was accused of “Project Fear 2” by Arlene Foster last week but in fact it was the completely independent forecasters at the Central Bank who really put the fear in us. While it is difficult to forecast accurately for a one-off catastrophic event like this, for which there is little precedent, nobody seems to think it will be good, and the projections are getting worse. The Central Bank said during the week there would be 34,000 fewer jobs by next year in the event of a no-deal Brexit and that it would mean 100,000 fewer jobs here in the medium term.
We have nearly come to take low unemployment for granted in this country in the past year or two, but it’s important to remember that unemployment costs the State a lot of money, and it means a lot less money for health and education. Given that even at nearly full employment we still struggle with health and education and other services, a return to higher levels of unemployment will be no joke.
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The Central Bank thinks that in the event of a managed Brexit, economic growth in Ireland next year would be 4.1pc. In the event of a no-deal Brexit, growth would be 0.7pc. Again, we have almost come to take massive growth rates for granted in this country. Supernormal growth rates, along with unexpected corporation tax receipts, are basically what gets the budget over the line every year and produces the money that gets found down the couch at the last minute for extras.
While it is true that not all sectors will be hit hard by a no-deal Brexit, agriculture and food are big employers in Ireland, and much of our exporting is done by small and medium enterprises. So the hit will be disproportionate on rural areas and on small businesses, two areas that are vulnerable anyway.
The collective hive mind of the market might be a more accurate predictor than a Central Bank, and what the market has to say about the consequences for a No-Deal Brexit in the UK is not good either. The currency markets, in their collective wisdom, discounted sterling by 4pc over the past month.
Most of this discounting happened after Boris Johnson started his ”do or die” rhetoric over a no-deal. When sterling was near its nadir against the dollar last week, analysts were saying the market was factoring in a 38pc chance of a no-deal Brexit. If you apply basic probabilities in a back-of-a-cigarette-box calculation, if a 38pc chance of no-deal exit hits sterling by 4pc, does an actual 100pc certain no deal drop it by 10pc, at which point sterling is lower than the euro?
Last week, Mark Carney, the governor of the UK central bank, predicted more carnage for sterling, even in the event of a managed Brexit. He said there was a one-in-three chance of recession in the UK in the New Year, again even with a managed Brexit, and he predicted stunted growth.
Leaked UK government documents last Thursday talked about consumer panic, food shortages, challenges to law and order in Northern Ireland and a rise in organised crime including smuggling of goods and people. The last of these is an issue that will hit us as well as the UK if it comes to pass. We’ve seen various other warnings too. Big businesses threatening to pull out of the UK – in recent days there were warnings from both Vauxhall and BMW, who make Minis in the UK – a lack of preparedness by most smaller businesses, total uncertainty, the potential for civil unrest, in Wales if nowhere else, potential for mass slaughter of livestock, and on and on.
So we all agree then that Ireland and the UK will be hit very badly by a no-deal exit. There’s not so much concern in the rest of the EU. They’ll notice it for sure. The German motor industry seems to be one of Boris’s great hopes to make Europe blink, and of course Germany will also be hit on trade in pharmaceuticals, chemical and petroleum products with the UK. Belgium is predicted to be among the hardest hit. And France will take some pain too. But most analysts agree that the UK and Ireland will be most catastrophically affected.
So Britain and Ireland have something in common here. We have more skin in the game than anyone else. Now, of course, we have to accept, as has been pointed out a lot, that Britain is the one choosing to leave the EU, so sympathy for them is limited. Then again, we might spare some sympathy for the half of the population who didn’t want to leave the EU in the first place, and the seven in 10 who don’t support a no-deal Brexit.
But you’d wonder if the kind of toxic relationship that has now developed between us and the UK is in our best interests at this time. We have aligned ourselves with the 27, who obviously don’t want a no-deal Brexit, but who have less at stake than we do. It often seems like more of a game to some of these Eurocrats. They toyed with Theresa May, and gave cheeky soundbites and tweeted about it, as if it was just another issue rather than life and death as it is for us and the UK.
The 27 are backing us for now and they will back us as long as they back us. But their backing is slightly academic in a way, because no one has an answer that works here. Meanwhile we continue to alienate the UK.
A narrative that has developed now is that Ireland is the grown-up and the UK is a toddler having a tantrum. It is an appealing one to us in ways as a perceived overturning of the historical narrative of the UK’s paternalism/maternalism towards Ireland. But we should keep questioning our own position too. Are we the ones with our fingers in our ears refusing to listen to anything we don’t want to hear?
And we get up on our high horses about, for example, Boris taking too long to ring Leo. Yet we are the ones who have continued to tell the UK in no uncertain terms that if they want to discuss Brexit they need to go to the EU. We will not be talking to them. Ministers here were even warned about not engaging with their opposite numbers in the UK in case they tried to talk to them about Brexit.
When Timmy Dooley got slapped down last week for breaking the line on supporting Leo Varadkar, it made you wonder. When anyone who dissents is castigated for thoughtcrime or letting the side down, are we in a healthy place right now? Are we right to have put all our eggs in one strategic basket with no dissent brooked? Or should we be making more effort to find common cause with the one country that is in the same boat as us right now?
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Home » Analysis & Comment » Brendan O'Connor: 'Time to don the green jersey and protect our own interests'
Brendan O'Connor: 'Time to don the green jersey and protect our own interests'
Let’s don the green jersey for a few minutes and talk about Ireland’s interests. And let’s talk goal congruence, and whose interests coincide with ours. Over the past week, we saw very clearly who the main losers in a no-deal Brexit scenario would be. It would be us, and the UK.
Leo Varadkar was accused of “Project Fear 2” by Arlene Foster last week but in fact it was the completely independent forecasters at the Central Bank who really put the fear in us. While it is difficult to forecast accurately for a one-off catastrophic event like this, for which there is little precedent, nobody seems to think it will be good, and the projections are getting worse. The Central Bank said during the week there would be 34,000 fewer jobs by next year in the event of a no-deal Brexit and that it would mean 100,000 fewer jobs here in the medium term.
We have nearly come to take low unemployment for granted in this country in the past year or two, but it’s important to remember that unemployment costs the State a lot of money, and it means a lot less money for health and education. Given that even at nearly full employment we still struggle with health and education and other services, a return to higher levels of unemployment will be no joke.
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The Central Bank thinks that in the event of a managed Brexit, economic growth in Ireland next year would be 4.1pc. In the event of a no-deal Brexit, growth would be 0.7pc. Again, we have almost come to take massive growth rates for granted in this country. Supernormal growth rates, along with unexpected corporation tax receipts, are basically what gets the budget over the line every year and produces the money that gets found down the couch at the last minute for extras.
While it is true that not all sectors will be hit hard by a no-deal Brexit, agriculture and food are big employers in Ireland, and much of our exporting is done by small and medium enterprises. So the hit will be disproportionate on rural areas and on small businesses, two areas that are vulnerable anyway.
The collective hive mind of the market might be a more accurate predictor than a Central Bank, and what the market has to say about the consequences for a No-Deal Brexit in the UK is not good either. The currency markets, in their collective wisdom, discounted sterling by 4pc over the past month.
Most of this discounting happened after Boris Johnson started his ”do or die” rhetoric over a no-deal. When sterling was near its nadir against the dollar last week, analysts were saying the market was factoring in a 38pc chance of a no-deal Brexit. If you apply basic probabilities in a back-of-a-cigarette-box calculation, if a 38pc chance of no-deal exit hits sterling by 4pc, does an actual 100pc certain no deal drop it by 10pc, at which point sterling is lower than the euro?
Last week, Mark Carney, the governor of the UK central bank, predicted more carnage for sterling, even in the event of a managed Brexit. He said there was a one-in-three chance of recession in the UK in the New Year, again even with a managed Brexit, and he predicted stunted growth.
Leaked UK government documents last Thursday talked about consumer panic, food shortages, challenges to law and order in Northern Ireland and a rise in organised crime including smuggling of goods and people. The last of these is an issue that will hit us as well as the UK if it comes to pass. We’ve seen various other warnings too. Big businesses threatening to pull out of the UK – in recent days there were warnings from both Vauxhall and BMW, who make Minis in the UK – a lack of preparedness by most smaller businesses, total uncertainty, the potential for civil unrest, in Wales if nowhere else, potential for mass slaughter of livestock, and on and on.
So we all agree then that Ireland and the UK will be hit very badly by a no-deal exit. There’s not so much concern in the rest of the EU. They’ll notice it for sure. The German motor industry seems to be one of Boris’s great hopes to make Europe blink, and of course Germany will also be hit on trade in pharmaceuticals, chemical and petroleum products with the UK. Belgium is predicted to be among the hardest hit. And France will take some pain too. But most analysts agree that the UK and Ireland will be most catastrophically affected.
So Britain and Ireland have something in common here. We have more skin in the game than anyone else. Now, of course, we have to accept, as has been pointed out a lot, that Britain is the one choosing to leave the EU, so sympathy for them is limited. Then again, we might spare some sympathy for the half of the population who didn’t want to leave the EU in the first place, and the seven in 10 who don’t support a no-deal Brexit.
But you’d wonder if the kind of toxic relationship that has now developed between us and the UK is in our best interests at this time. We have aligned ourselves with the 27, who obviously don’t want a no-deal Brexit, but who have less at stake than we do. It often seems like more of a game to some of these Eurocrats. They toyed with Theresa May, and gave cheeky soundbites and tweeted about it, as if it was just another issue rather than life and death as it is for us and the UK.
The 27 are backing us for now and they will back us as long as they back us. But their backing is slightly academic in a way, because no one has an answer that works here. Meanwhile we continue to alienate the UK.
A narrative that has developed now is that Ireland is the grown-up and the UK is a toddler having a tantrum. It is an appealing one to us in ways as a perceived overturning of the historical narrative of the UK’s paternalism/maternalism towards Ireland. But we should keep questioning our own position too. Are we the ones with our fingers in our ears refusing to listen to anything we don’t want to hear?
And we get up on our high horses about, for example, Boris taking too long to ring Leo. Yet we are the ones who have continued to tell the UK in no uncertain terms that if they want to discuss Brexit they need to go to the EU. We will not be talking to them. Ministers here were even warned about not engaging with their opposite numbers in the UK in case they tried to talk to them about Brexit.
When Timmy Dooley got slapped down last week for breaking the line on supporting Leo Varadkar, it made you wonder. When anyone who dissents is castigated for thoughtcrime or letting the side down, are we in a healthy place right now? Are we right to have put all our eggs in one strategic basket with no dissent brooked? Or should we be making more effort to find common cause with the one country that is in the same boat as us right now?
Source: Read Full Article