The voters of the Irish Republic today render a verdict on a Eurozone Fiscal Compact hastily composed to salvage the common currency.
While technically a vote on whether to mind the compact’s strictures – keeping budget deficits below 3 percent of GDP and not allowing total debt to exceed 60 percent of GDP – in effect, this amounts to an Irish referendum on the euro.
With open talk of Greece leaving the Eurozone, the fiscal compact, only recently heralded as the latest savior of the currency, is looking more irrelevant by the day. Ireland, like many EZ economies, has long failed to meet the fiscal compact’s requirements – with debt-to-GDP running at about 108 percent of GDP, and government spending about 12 percent above revenues.
Given the depths of economic pain the Republic has endured since its property bubble burst in 2008, and the mounting evidence that radical austerity – whether designed in Berlin, Brussels or London – is an abject failure as an economic policy – one might think Irish voters would register a resounding “No!” next month.
Yet polls suggest Irish voters will swallow their anger and their medicine too, building on the stoic reputation they have earned in the face Brussels’ austere dictates. What accounts for Ireland’s stubborn resilience to Europe in the face of an unemployment rate of 14.3 percent, little prospect of robust growth and no way to devalue its currency?
The fact is, the relationship between the Republic and Europe goes far deeper than the common currency. Whatever critics may think of the euro’s effect on the Republic today, the benefits of EU membership have transformed Ireland’s image, its economy and its culture since accession in 1973 – to the benefit of Irish on both sides of the famous border.
Not that there isn’t anger – some of it quite justified. The once-celebrated decision to hitch the national wagon to the Eurozone looks, in retrospect, as the undoing of nearly a century of hard-won independence for the Republic of Ireland. As one Irishman put it to me, “We fought the English for 600 years to win our independence, and then pissed it away to the Germans in just a decade.”
This is an exaggeration, to be sure (for one thing, it took several decades). But it’s not far from the feelings many in the Republic now harbor about the Eurozone. Being labeled as “peripheral,” lumped in with “Club Med” and condemned to follow the dictates of wrong-headed Teutonic austerity, many ask reasonably whether the Republic wouldn’t be better off bringing back the homely old punt.
In spite of the travails that resulted from joining a flawed currency union, the EU writ large has reshaped Irish society for the better, transforming the nation’s backward infrastructure and opening it to the world. A cottage industry of pro- and anti-Europe websites will twist facts to suit their referendum campaigns, but the numbers, a recent history, tell a fairly consistent story.
Start with raw numbers: Setting aside the EUR 113 billion bailout of profligate Irish banks in 2010, conservative estimates of Ireland’s net gain – including funds from the EU’s Common Agricultural Policy, its Structural and Cohesion Fund, and a plethora of smaller bureaucratic channels, has amounts to somewhere north of EUR 40 billion, according to very conservative ECB estimates.
On foreign affairs, EU membership has provided Ireland with the rotating presidency of the world’s largest economic block on five occasions since 1973, opening what had been a largely closed nation to a wider view. Without it, it is hard to imagine that Mary Robinson, Ireland’s former president, could have served so well as the UN’s High Commissioner for Human Rights.
But the EU link did more than grade roads and help make Ireland a player in global diplomacy; it also elevate Gaelic to an official European language, drew billions in foreign direct investment (especially from US firms eager to site within the EU common market). All this as it helped pry open Irish educational and social institutions to the modern world.
Ireland in 1973, as I well remember, was a society that had remained stubbornly in the thrall of clerics and easy prey to nationalists with no program other than rejection, tariffs and neutrality. You were much more likely to hear vespers on the radio than rock and roll.
Here, perhaps, is where the Irish on both sides of the border owe Brussels a different kind of debt. For the cultural transformation of the Republic since 1973 played a vital role in reducing the differences, real and imagined, that once made rapprochement between the Republic and Northern Ireland unthinkable. Without this subtle homogenization, the Good Friday Accord does not happen, I think.
Polls suggest the Irish in the south will plump – reluctantly – for the fiscal compact. If they do, it will seal Ireland’s reputation as the one “piggy” that actually sticks to its fiscal promises. Yet the deeper debts Ireland owes to Europe, too, will be in play. Dublin may yet ditch the euro, but when it comes to the blue flag of Brussels, the Irish should still be counting their lucky star.
Michael Moran is editor-in-chief of Renaissance Insights, the in-house think tank of the investment bank Renaissance Capital, and author of “The Reckoning: Debt, Democracy and the Future of American Power,” published May 17 in the UK by Palgrave Macmillan