Friday, 19 November 2010

Why 'Yes' is so hard for the Irish


Job Indonesia - In a radio interview, the Governor of the Bank of Ireland Patrick Honohan confirmed what most people expected - that some kind of bail-out for Ireland seems to be on the way. They may dress it up as a loan for the banks but it will involve tens of billions of euros. Up until the governor's comments, the Irish government was sticking to its line that it did not need rescuing. - Job Vacancy

Lowongan Kerja - And indeed even after the governor had spoken, Irish Finance Minister Brian Lenihan said that his country was not yet at the point of taking a substantial international loan.

Europe's crisis managers, who have been a busy bunch this year, had not envisaged a situation where a country did not want to be bailed out. Quite the opposite. In setting up various rescue mechanisms they feared the profligate, or those who ran up bad debts, would beat a path to their door.

So when last weekend various officials - some close to the European Central Bank - began briefing that it was only a matter of time before Ireland was bailed out, they did not expect such stout resistance from Dublin.

So why did Ireland try and hold out?

The Irish government is fragile. It faces a difficult by-election. Its hold on power is slight. A bail-out, however dressed up, is a humiliation. It is a judgment on the way the government has run the country.
There is a stigma to being rescued. The image of the Celtic Tiger has long disappeared but the Irish still cherish the memory. For some years they had the fastest-growing country in Europe. To be bailed out would wound Irish pride.

Then there are conditions. One of the reasons that Ireland did so well was inward investment - particularly from the US. Large multinational companies were attracted to Ireland by a corporate tax rate of 12.5%. Others in Europe - including the French and Germans - dislike the tax. They believe it gives Ireland an unfair advantage.
Many government officials in Ireland fear that one condition of a rescue would be to give up their low corporate tax rate. A few days ago, Ireland's Europe Minister, Dick Roche, bridled at the very suggestion. "We are in charge of our own taxes," he said. We shall see what the terms of any loan are.
European Commissioner for the Economy Olli Rehn (archive 
Then there is the not-so-little matter of sovereignty. Already Irish commentators have focused on the EU Economics Commissioner, Ollie Rehn. When they were not reporting on his visit to an expensive restaurant, they asked: "Is he the most important man in Ireland?" Is this unelected official essentially running the country, was the tone of some of the comment.

There are stirrings of unease here at what Ireland may be giving away. When it was announced that a team of experts from the EU, the IMF and the ECB were coming to Dublin, the opposition leader referred to them as "officials arriving to dictate terms of a bail-out to the government".

Ireland for a long period was enthusiastically European. Many smart people headed to Brussels. They embraced the European identity as a way of distancing themselves from their neighbour Britain. They took great satisfaction in seeing Irish companies buying up big hotels in London.

So there is foreboding as to what a bail-out would signify. One Irish commentator wrote today: "Having obtained our political independence from Britain to be the masters of our own affairs, we have now surrendered our sovereignty to the European Commission."

Brian Lenihan has defended the increasing influence of the officials from Brussels with references to European solidarity. "We share our sovereignty with Europe in relation to currency," he said. "We pool our sovereignty in this area, so if you're pooling your sovereignty, you have to act with your partners in whatever steps you take." Yesterday he spoke of a "very supportive reaction from the wider European family".

What the Irish government is hoping for - if the Bank governor is right - is a narrow deal to restore the liquidity of its banks so they can borrow more easily. That would be less of a humiliation.

It should not be forgotten that when Irish voters were first given a say on what became the Lisbon Treaty they voted "No". Irish independence is both young and keenly felt.

So if the country is forced to accept a full bail-out, questions will be asked about the future. Will Ireland ever regain control over its budget and its economy?
And that is a question being asked not just on the streets of Dublin but in Athens, Lisbon and Madrid.

Ian Martin, writing in the Wall Street Journal observed: "A new model of government without direct accountability to voters is being constructed."
That, of course, is the long-term implication of this crisis. Presuming that the eurozone does not fracture, its flaws are being used to give the European Commission much greater powers of scrutiny and economic management. And this may go further. While everyone focuses on Ireland, Greece and Portugal, the gap between these economies and Germany only widens. The price of saving the euro may be that the stronger countries bail out the weaker - precisely what German voters were told would never happen.

The "ever closer union" that some dream of may be delivered on the back of a battered currency.

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