John Bruton

Opinions & Ideas

Category: Europe (Page 1 of 2)

The Euro,  and its threat to the future of Europe

 

euroThe Nobel Prize winning author of “Globalisation and its Discontents” has set his sights on the euro in his latest economic polemic.

He sees the euro as a product of what he calls “neo liberal economics”, which he believes was in the intellectual ascendant in 1992, when the detailed design of the single currency was put in place.

Given that the idea of an Economic and Monetary Union in Europe goes back to the late 1960’s, and that one of the central drivers of the project was a French Socialist, Jacques Delors, this claim is contestable.

The flaws in the design of the euro derive more from poorly thought out compromises between France and Germany, and from wishful thinking, than they do from ideology.

Wishful thinking lay behind the decision to have a single Europe wide money, but to leave the supervision of banks, who create the money in the form of credit, to 17 different national authorities. This happened because Germany wanted a German authority to supervise German banks, and not a Europe wide one.  And it was these poorly supervised German banks who led the way in the mistaken cross border lending to Greece, Spain, Ireland and Portugal.

It is easy to see that mistake now, but the problem at the time was persuading Germany to give up its beloved DM at all, in favour of the euro. The mistake arose from national pride rather than economic ideology.

Obviously, if there was to be a single currency, there had to be common rules for preventing any one country issuing too much of it, and thereby creating inflation and devaluing everyone else’s money. In this case, the mistake was made of assuming that the only risk of this happening was through governments borrowing and spending too much. This lay behind the 3% of GDP limit on government borrowing in the Maastricht Treaty.

But no similar, centrally supervised, limit was placed on private sector money creation through the banks. As we now know, it was cross border private sector credit creation, through banks, that created the problems in Ireland, Spain and Portugal, whereas it was only in Greece that government borrowing was primarily to blame.  Stiglitz argues that this focus on controlling government borrowing, and ignoring private sector banking activity, arose from an ideological bias in favour of the private sector. He has a point.

He also points out that imbalances arising from trade deficits and surpluses within the euro zone were ignored in the original Maastricht rules. Before the crisis, the Irish and Spanish balance of payments deficits, and their counterpart German balance of payments surplus, were signals of the same underlying problem. The excessive private sector borrowing in Ireland and Spain was stimulated by the excess of German savings. Germans were earning more than they were spending, so they sought a return on their money by lending it to the Irish and the Spaniards. The persistence of this imbalance was a warning signal that was ignored. The new EU macroeconomic imbalance procedure belatedly attempts to deal with this, but it remains to be seen whether it will be implemented properly.

More profoundly, Stiglitz argues that, for the euro to work well, there must be a consensus among policy makers in all euro zone countries of what makes an economy grow. That consensus is missing. German and French economic views differ as much now, as they did when the euro was launched.  Germany does not believe that governments should provide fiscal stimulus when there is a down turn, whereas, in France, the political consensus would favour stimulus in almost all affordable circumstances.

Stiglitz, like the French, believes that reducing deficits should not be a priority, when the economy is slowing.  This may be good advice in theory, but there are two difficulties with it.

The first difficulty is that it presupposes that governments will pay for what they spend in bad times, by cutting back in good times. But that is usually politically impossible. This is a practical flaw in Keynesian economics.

The second difficulty concerns a fundamental fact that is not mentioned once in Stigltz’s 350 pages. This is the ageing of the population of all EU countries over the next 40 years. This reduces the ability of EU states to borrow and spend for other things.  The extra costs of pensions and health care for Europe’s ageing population will, if policies remain as they are, mean that the debts of EU governments will rise from around 90% of GDP today, to 400% by 2060. That prospect leaves little room for stimulative borrowing today.

In the 1990’s it was different. Then Europe had a younger population, there was an annual growth rate in world trade that was twice the present one.  There were growth promoting options then that do not exist now, and are not likely to exist in the near future. This limitation is ignored by Stiglitz, who blames everything on the euro.

He argues convincingly that the EU needs greater political integration, if the euro is to be a success. But some of the ideas he canvasses lack political realism, for example a tax on German trade surpluses, and a 15% EU wide income tax on incomes above €250,000 (on top of national income taxes)!

He argues that the euro is, to some extent, now being held together by fear. A currency break up would be so unpredictable that no one wants to try it. But fear is not a healthy basis for European integration. Ultimately a shared European patriotism, and a greater degree mutual trust between euro zone electorates, are needed if these electorates are willingly to put their savings at risk to insure one another against unexpected shocks.

Understandably, as an American and an economist, Stiglitz does not address how this might be done.  That is a task for Europe’s politicians, and so far they have failed to come up with many original ideas.

But if that task is successfully undertaken, the economic rewards for Europe of having its own global currency, and its own system of mutual financial protection for its member states and its banks, could be very great indeed. There are opportunities here, as well as threats, but this book unfortunately only looks at the latter.

Stiglitz might also have given greater weight to the improvements that have been made in the management of the euro in the past three years-in the form of better banking supervision, new bailout funds for states and for banks, and more subtle economic rules.

But this is not enough.

Some of Joseph Stiglitz’s other suggestions- a common bank deposit insurance system, a write off of some Greek debt, and a partial sharing of unemployment insurance costs- should be acted upon. They are needed to ensure that the euro is able to withstand the next economic shock, and should not be postponed until after the German, or any other, General Election.

Book Review for the “Irish Times” Author; Joseph E Stiglitz  Publisher; Allen Lane

WHO WILL PROTECT IRISH AND OTHER EU FIRMS DOING BUSINESS IN THE UK AGAINST DISCRIMINATION, AFTER BREXIT?

cropped-European-Union-flag-006-1.jpgMany Irish firms, and firms from other EU states, have extensive investments and trading interests in the UK. Indeed this must one of the most intense investment relationships in the world.

For the past 40 years, these investments have been protected by UK membership of the EU, which allowed firms, who might feel they were being discriminated against, in favour of British owned competitors, to appeal not only to the UK Courts, but also to the European Court of Justice(ECJ)

Yesterday the UK Prime Minister announced that , once the UK leaves the EU, the jurisdiction of the ECJ in the UK would be ended. Thus there will no longer be any, non UK controlled, arbiter to protect Irish or other EU investors in the UK against discriminatory laws by a future UK government. The UK has no written constitution.

Therefore it will be important that there be a robust independent investor protection disputes mechanism, capable of overturning discriminatory decisions that might be taken by the UK courts against the interests of EU owned firms.

 This must take immediate effect the day the UK leaves the EU.

It cannot wait for the longer term trade agreement the EU negotiates with the UK, which may take years to finalise. Investor protection clauses can be controversial, as we have seen with the TTIP negotiation, and are a reduction of “sovereignty” in the abstract sense.

But , given three factors

  • the highly nationalistic tenor of UK politics at the moment,
  • the dramatic ideological trends in the Labour  party, and
  • the likelihood of trade tensions between the UK and the EU,

Irish and other EU firms doing, or intending to do, business in the UK will need a very robust independent investor protection regime.  These three phenomena must be confronted realistically. We must not assume that everything will work out in the end. It may not!

Unless Irish and other European firms have concrete assurances that they will not face discrimination of any kind in  their activities in the UK after Brexit, they may have to commence disinvestment to protect their shareholders’ legitimate interests. The proposed “Great Repeal Bill”, reversing EU law in the UK, will need to scrutinised with immense care by  Irish and other European investors in Britain. Political assurances will not be good enough.

In the present atmosphere of UK politics, it is all too easy to envisage calls for discrimination in favour of UK firms in contracts with UK local authorities, in access to certain public services, and in standards for goods and services. All would be done, of course, in the name of “protecting British jobs”, or “defending British standards”.

If the ECJ is no available to protect Irish and EU firms from discriminatory practices on the UK market, alternatives will have to be agreed with the UK. These alternative mechanisms, investor courts in other words, will have to have the power, like the ECJ, of striking down UK decisions, including UK court decisions,  that they deem to be discriminatory against the interests of an EU investor.

These mechanisms are known as  an Investor-state dispute settlement (ISDS) or an  investment court system (ICS). They are an instrument of public international law and  grant an investor the right to use dispute settlement proceedings against a country’s government.

Provisions for ISDS are contained in a number of bilateral investment treaties, in certain international trade treaties, such as the North American Free Trade Agreement (chapter 11), the Trans-Pacific Partnership (chapters 9 and 28) and the Comprehensive Economic and Trade Agreement (sections 3 and 4). ISDS is also found in international investment agreements, such as the Energy Charter Treaty.

If an investor from one country (the “home state”) invests in another country (the “host state”), both of which have agreed to ISDS, and the host state violates the rights granted to the investor under public international law, then that investor may bring the matter before an arbitral tribunal.

The prospect of having to use such cumbersome procedures will undoubtedly be daunting and difficult for small firms.

This will be particularly difficult for Irish firms who have been used to treating the UK as part of their “home market” since 1966 and the Anglo Irish Free Trade Agreement.

In the aftermath of the original referendum decision, soothing statements were made by British Ministers about the position of Ireland, and about there being no “hard border. But Prime Minister May’s speech to her Party Conference yesterday represents a major shift in position. She is going for a “hard Brexit”, which inevitably means a “hard border”. She offered no assurances to Ireland.

Indeed it is hard to see how the UK could offer special protection to Irish firms investing in the UK that it was not also offering to French or Romanian firms.

The Irish food industry is heavily invested in the UK market. Before it joined the EU, the UK discriminated heavily in favour of UK farmers and against Irish exports. The food industry is far more complex now than it was forty years ago, and the opportunities for discrimination more subtle and more numerous.

The European Union will need to adopt a tough line on investor protection in the forthcoming negotiations and make sure these protections apply in full from the moment the UK leaves, and are not left to a wider long term negotiation.

WILL BREXIT NEGOTIATIONS BE OVER BEFORE THE 2020 UK  GENERAL ELECTION?

union-jack-1027896_960_720The next UK General Election will be in 2020.  If the Article 50 notice is served in 2017, it is possible that the process of UK withdrawal from the EU will not be concluded before the UK General Election in 2020.

That might allow the UK Electorate to take a second look at their decision of 23 June.

The Article 50 process, once activated, proceeds according to paragraph 2 of  Article 50.

 The mechanics of the negotiation are set out in Article 218 (3), which governs the making in international agreements by the EU.

It provides for the negotiation to be done by the Commission, subject to directives from the European Council. Ireland would formally make its input via the Council.

A key phrase in Article 50 is that the Withdrawal negotiation would be conducted

 “taking account of the future framework of its relationship”

with the country leaving the EU .

In other words, the Withdrawal would take place within a wider framework, which would also be  agreed between the EU and  the UK.

So there would be two parallel processes

  •  a negotiation of a framework of  the future relationship with the UK, and
  •  the Withdrawal negotiation itself.

In effect the two negotiations would be linked.

This is different from what Commissioner Malmstrom said recently.

She said the broader negotiation could not take place until AFTER the Withdrawal agreement with the UK was concluded, and the UK was already outside the EU.

Her interpretation seems to me to be contradicted by the words of Article 50 because it ignores the fact that the reference in Article 50 to a broader framework agreement.

If the  formal  Withdrawal arrangement under Article 218 (3) has to be subject to a wider framework being agreed, the whole process could take a very long time indeed,  and meanwhile the  status quo would continue until both agreements are completed and ratified.

The Withdrawal part could be quickly agreed, but the future framework would be much more difficult and could drag on and on, because it would have to cover all sorts of knotty trade and regulatory issues which could not be settled on the basis of generalities.

That is assuming the UK does not join the EEA, which would simplify these “framework” issues.

It also assumes unanimous consent in 2019 of the 27 EU members to extend the 2 year withdrawal period, but that should not be impossible

Of course, it requires the UK  not to derail the process by unilaterally breaching the Treaties by failing to implement EU law, during the negotiations, Eg by immigration  controls or repealing  some EU legislation on working hours.

It assumes that the UK would be willing to stay in a “half in/ half out” position for a long time, without enjoying the supposed benefits of Withdrawal, but with its influence in the EU diminished.

The UK should probably have given more thought to these complexities before triggering a  referendum.

 But the complexities do allow time for reconsideration, assuming there is, at some time in the next three years, a political willingness to reconsider in the UK.

That does not look likely now, but moods can change.

The UK has a big balance of payments deficit already….Brexit or no Brexit.

The inevitable unwinding of that deficit will reduce economic growth, which normally would also reduce immigration. So opinion may be different in 2020.

That said, other EU countries, including Ireland must prepare our economies on the assumption that full Brexit will happen.

UNDERSTANDING ENGLISH HISTORY…..A HELP IN PREDICTING THE REFERENDUM RESULT?

englishIn a quest to understand English nationalism, which is currently manifesting itself in a campaign to take the entire United Kingdom out of the EU, I have been reading as much English history as I could find.

One of the best books I have found particularly good is “The English and their History” by Robert Tombs, who is an historian in Cambridge University specialising in Anglo French relations.

Now that the Empire is over, and the Scots have been granted the possibility of leaving the United Kingdom, the English, naturally enough, are focussing on their own distinctive story, as a means of identifying who they are, and what makes them different.

Tombs make a number of claims that are of interest in this context.
He says that English and Irish(Gaelic) were the two most developed vernacular languages in Europe in the seventh Century AD.

The Viking invasions seriously disrupted English society from 793 onwards, and Viking invasions, from their bases in Dublin, were a particular problem on the west coast of England.

But the Viking invasions still left the English power structure in existence.
This was not the case with the Norman Conquest, which was accompanied by land grabbing Norman French colonists, who decapitated the traditional English society, dispossessing the native English landholders. In many respects the results of that conquest on land ownership in England survive to this day.

On the other hand, the English system of common law, based on judges’ decisions in individual cases, rather than on statues or codes, survived. Tombs claims the common law was the first national system of law in Europe.

The population of England tripled between 1100 and 1300, and it supported a forward military policy by the Kings of England in France, Ireland and Scotland.
That population growth, and the forward military policy it supported, came to an abrupt end with the Black Death of 1349, which halved the population and led to a major labour shortage.

The Reformation affected England very differently to the way it affected Scotland and Ireland.

In England a compromise religion, incorporating elements of Protestantism and Catholicism, was imposed from the top by the King.

In Scotland, Protestant Presbyterianism grew from the bottom upwards but was never embraced by the Scottish royal family(the Stuarts).

In Ireland ,the Protestant Reformation was rejected by both the Old English settlers and the Gaelic Irish, but for different reasons.

Prior to the Reformation, the monasteries in England provided a social welfare system for the people. When the land of the monasteries was taken over by the King, a substitute Poor Law system was eventually introduced in 1601.

The Parish became the unit of government and the landowners its financiers. This system worked disastrously badly when put to the test in the Irish Famine of the 1840’s.

Another seminal event was the overthrow of the legitimate King, James the second in 1688, by his usurping son in law, William of Orange.

Among the rights proclaimed by William, to win support against James, were

+ The right to bear arms
+ The right to trial by jury and
+ the right to frequent elections and sessions of parliament.

Interestingly these rights are considered now to be basic “American rights”, but their origin is in the English struggle against James the Second.
William also had the legislation passed which still disqualifies a Catholic from being King of England.

Even in the 19th century, religion, rather than social class, was the better predictor of how the English would vote. Anglicans were Tory, while other Protestant groups tended to vote Liberal, and later Labour.

In the 18th century, 80% of English tax revenue was spent on warfare. In the early 19th century, the “English” Army relied disproportionately on Irish and Scottish recruits. The Welsh were more pacifist inclined.

Thanks to its Navy, the UK became, in the 19th century, the dominant force in world trade. It did 20% of all the trade, and owned 40% of all the ships on the high seas. One has the sense that advocates of Brexit think that that is still the case!
The cost of the First World War was something from which England never recovered. Even by 1929, before the Great Crash, its exports were still 20% below their 1913 level.

England could have made peace with Hitler in 1940, and nearly did so. The world is a better place for the courage they showed in not doing so. Neutrals should not forget that!

England today is living beyond its means.

In 1996 people were saving 10% of their income. By 2007, they were spending it all.
The euphoria generated by an unsustainable balance of payments deficit may lead English voters to make a very bad mistake on 23rd June.

WHY I BELIEVE THE UK SHOULD STAY IN THE EU

IMG_3745

Stonyhurst College

THE EU IS A VOLUNTARY UNION

The fact that the British voters are free to have a referendum, and free to decide to leave the
European Union shows that the European Union is a voluntary Union.
It is not an Empire, which something a country would not be free to leave.
Nor is it a Federal Union like the United States, which does not permit its member states to leave either.
The EU’s voluntary character is one of the reasons why a number of states are still looking to join the EU.

THE FIRST TIME IN 60 YEARS ANY COUNTRY HAS CONSIDERED LEAVING

The 23 rd of June 2016 will, however, be the first time in the EU’s 60 year history, that any state has contemplated leaving.
This is a serious matter not just for Britain, but for all the countries of the EU.
So British voters, acting as as citizen legislators on 23 June, ought to think of the risks, that a British decision to leave might create for neighbouring countries in the EU, like Ireland. Voters here in Lancashire need to think about the consequences for peace in Ireland of the deepening of the border in Ireland that would flow from a Brexit decision on 23 June.

They also should consider the risk that Britain deciding to leave would create a precedent that would weaken the bonds that hold the remaining 27 countries together. The Parliament in Westminster has passed to voters the responsibility for deciding if a possible breakup of the EU would really be good for Britain, and for Europe too. It is a big responsibility.

STABILITY IN EUROPE HAS ALWAYS BEEN IMPORTANT TO BRITAIN

Stability in Europe has been a long term British goal.
Edmund Burke in the 1790’s favoured a Commonwealth of Europe.
Castlereagh worked for a Concert of Europe, with regular Summit meetings like the EU now has, after the end of the Napoleonic Wars.
Winston Churchill, in 1930,advocated a United States of Europe.
These statesmen did not advocate these ideas out of some sort of dewy eyed sentimentalism. No, they had a hard headed appreciation of the fact that stability on the continent meant greater security for Britain, and they made their suggestions to achieve that end.

Now it is British voters, not British statesmen, who must decide what is best for Europe,

+ a Union with Britain on the inside, or
+ a fractured Union, which Britain has left of its own free will.

BREXIT COULD DOUBLE THE REGULATORY BURDEN

We hear much about EU Regulations and the burdens they impose. But even if Britain left the EU, it would still have regulations of its own on things like the environment, financial services and product safety.

In fact, to the extent that a Britain that had left the EU wanted to sell goods or services to Europe, it would have to comply with TWO sets of regulations,

+ British regulations for the British market, and
+ EU regulations for the EU market, including Ireland.

Arguably the duplicated post Brexit regulatory burden on British business would be greater than the present one.

A UK/EU TRADE DEAL COULD TAKE YEARS TO NEGOTIATE

Some believe that the UK could leave the EU, and then quickly negotiate a free trade agreement which would allow British firms to go on selling in Ireland and the other EU countries.
I am sure an agreement of some kind could eventually be worked out, but it would not be quick.
Switzerland negotiated trade agreements with the EU, but that took 9 years.
Canada negotiated a Free Trade agreement too, but that took 7 years.
The British Agreement would be much more complicated than either of these, because it would involve new issues like financial services, and freedom of movement ,and access to health services, for example for Britons in Spain. It would have to cover agriculture.
Even with maximum goodwill from the European Commission, a post Brexit EU trade agreement with Britain would become prey to the domestic politics of the 27 remaining EU countries, each of whom would have their own axes to grind.
There would be a lot of uncertainty, over a long period.

STAY IN, AND MAKE EU BETTER

I believe British people should accept that entities like the EU, which provide a structure, within which the forces of globalisation, can be governed politically are essential, if the prosperity that flows from globalisation is to be shared fairly.
Rather than leave, Britons should consider how they can make the EU better than it is, and there is plenty of scope for that.

Speech by John Bruton, former Taoiseach of Ireland, in Stonyhurst College, near Clitheroe in
Lancashire on Sunday 29 May at 5pm

WHAT ARE THE HISTORIC ROOTS OF BRITAIN’S CONTINUING ANGST ABOUT EUROPE?

Britians Europe.inddWhy has Britain always had such an ambiguous approach to being involved in the EU?

Why did it refuse to join the Common Market in 1957, only to apply to join in 1961?

Why has it felt the need to opt out of many EU policies, and why is making a  modest contribution to the EU budget so controversial in Britain?

 I have recently read

 “Britain’s Europe,  A thousand years of Conflict and Cooperation” by Brendan Simms, an Irish historian,  who is Professor if the history of International Relations in Cambridge University in the UK.

In this excellent book, he explores the deep historic roots of Britain’s attitudes to the continent of Europe.

His underlying thesis is that England’s abiding concern has been to protect itself from unwanted intrusion by continental European powers.

Even Britain’s imperial expansion into other continents, and its development of the dominant navy in the world, were designed, Simms believes, to bolster its position vis a vis Europe.

England interfered in Ireland and Scotland, and invaded them, to prevent them being used as a base by its continental enemies. These motives, Simms argues, lay behind the Acts of Union of 1707 with Scotland, and  of 1800 with Ireland.

England made alliances with lesser powers on the continent to curb whichever was the continent’s biggest power.

First it did so to curb Spain, later to curb France, and most recently to curb Germany.

Its policy was to create a balance of power on the continent so that no one continental power would be strong enough to threaten Britain.

It always felt vulnerable to invasion from the continent, and indeed it was only thanks to luck, or to unfavourable winds, that many planned invasions did not happen. The last successful invasion was by the Dutch in 1688.

To deter invasion, England always wanted to ensure that the dominant continental power did not control the “Low countries”, now Belgium or Holland. Britain went to war against France in 1792, and against Germany in 1914, to prevent the dominant European power controlling the Low countries.

British statesmen have not been opposed to European unity on principle.

For example, Edmund Burke favoured a “Commonwealth of Europe.”

After the defeat of Napoleon in 1814, Castlereagh favoured regular European Summits.

The problem for England is that a united Europe would make the British policy or backing lesser powers to create a balance of power impossible to operate, unless, of course, Britain could do this from INSIDE a united Europe. But that would trammel its historic freedom of action.

Its continuing inability to decide on which of these contradictory options to pursue explains why “Europe” is such a toxic issue in British politics.

Brendan Simms argues that Britain “cannot be compared” to other European powers because of

  •  its economic strength,
  •  its permanent UNSC seat,
  •  its nuclear deterrent, and
  •  the size of its conventional military.

He believes that the Euro Zone will have to create a fully fledged Federal state to sustain the Euro. He believes the UK would stay out of this.

While I agree with this last point, I find both of his other arguments unconvincing.  Britain is not that different, and the euro can be sustained without a fully fledged Federal state being created. I attempted to show how, in a previous posting on this site.

This is a very timely book and deserves to be read in all European countries, including Ireland.

The balance of power thinking that motivates British policy was relevant when Europe had 25% of the world’s population and 50% of its wealth. It makes much less sense now, when Europeans are only 7% of the world’s population and have a declining share of global wealth.

Nostalgia is nor a sound policy, for Britain or for Europe as a whole. That is why UK voters should remain in the EU.

IS THE EUROZONE READY FOR THE NEXT CRISIS?

European-Union-flag-006HAS IT BUILT SUFFICIENT DEMOCRATIC UNDERPINING FOR THE  NECESSARY SHARING OF RISKS AND RESOURCES ?

The  2008 crisis was not a one off event.  The resources that were available to cope with that crisis would not necessarily be there if there was another crisis. Government debt/GDP ratios are still high and pension and health costs are escalating across Europe. Structural reforms in countries like France are moving at a snail’s pace.  Countries have not benefitted equally from the convenience of having a common currency. For example, Ireland has benefitted much more than Italy.

Risks remain.

The borrowing by non bank institutions globally is higher now than it was in 2008. Concern is sometimes expressed about the expansion of  the less supervised “shadow banking “ sector in China. Shadow Banking represents 40% of the Chinese GDP. Shadow banking is nearly  200% of the Euro  area GDP!

Forecast economic growth for the world as a whole in 2016, at around 2.9% is at its lowest level since 2009. Non performing loans in the banking system remain stubbornly high, so the stimulus being given to the economy by the European Central Bank (ECB) is being soaked up, keeping these afloat, rather than being used in new lending.  Money is there, but it is not circulating fast enough.

Meanwhile Europe’s leaders are thinking of their national electorates, rather than of the Euro zone as a whole. This is because they are each elected and re elected by national electorates, rather than by a common EU or Eurozone electorate. Political incentives , and economic responsibilities, are not aligned in Europe. That needs to change.

A roadmap towards a complete Economic and Monetary Union was produced by the Presidents of the European Parliament, the European Council, the European Commission, the ECB and the Euro group  in 2015.

 It called for a number of reforms to be implemented, in three stages, with a view to completion of the final stage by 2025. The first stage is from 2015 to 2017.

 Progress on some of the first stage reforms has been made, for example on a single system for winding up banks. But Slovenia and Belgium have still had to be taken to Court to get them to implement what they have agreed.

Progress is also being made on a union of EU Capital Markets.

The 5 Presidents proposed, in the first stage,  a networking system of European Competitiveness authorities to promote structural reforms but little is happening on that. Some question what it would add.

It also proposed an advisory Fiscal Board. The members of this will be part time (10 days a year) so it is hard to see this making much difference. If states ignore advice from the European Commission and the OECD, why should they pay much attention to this new advisory board?

In accordance with the 5 President timetable, the Commission has proposed, as part of the first stage, a system of mutual deposit insurance. This is crucial because without it, the link between bank solvency and the solvency of states is not  broken.

Some countries are reluctant to agree to this because they fear their banks will find themselves bailing out depositors in banks in less well managed countries. Banks in individual states are still buying an unhealthily large amount of the bonds of their own countries. It ishard to have  mutual deposit insurance of banks across the Eurozone as long as that insurance could be used, indirectly, to prop up states that are not managing their finances properly.

The Euro zone continues to rely on “naming and shaming”, and on possible fines, to get member states to manage their fiscal policy in accordance with the agreed rules. In other words, it is relying on politics to discipline politics! On its face, this is a naive proposition.

It would be much better if the bond markets did that job, through differentiating interest rates between well and less well managed countries. But that will not happen if investing in government bonds  of Euro Zone states can be assumed to be risk free. A bail in system for government bonds would change that. But that is not on the agenda.

In Stage two, the 5 Presidents proposed a “macro economic stabilisation function” for the euro area. This is, in effect, a fund that could be used to support the budgets of states that are in difficulty and, if properly managed, could be a big confidence giver to the euro zone economy.

But the criteria on which it would work are unclear. Would it be used to cushion against short term shocks, or to promote ling term reforms? It is also unclear where the money might come from. Some have suggested a financial transactions tax, others a share of VAT revenue.

The other missing element in the 5 Presidents Report is a convincing system for mobilising European opinion behind proposals where some countries may have to accept short term sacrifices for the greater good. We are well able to do this within states, and indeed that is what states exist to do. But solidarity is weak at European level.

The only proposal to enhance the democratic legitimacy, in stage two  of the proposed Complete Economic and Monetary Union, is closer involvement of national Parliaments. While I have no doubt that good work will be done in committee rooms by hard working politicians, under this proposal,  it will be largely anonymous and technical, and addressed to national concerns and national electorates. It will not paint the big picture.

It will not create a sense among the great European public that they have been brought on board, and give them a sense that they have endorsed all the cross border risk and resource sharing that a real Complete Economic Union must involve.

I believe that that can only happen will be  if there is a regular Eurozone Presidential Election Campaign,  before we move on to stage 2 and 3 of the proposed full Economic and Monetary Union.

During such a  campaign, rival economic programmes for the final phase s of economic and monetary union could be  canvassed by rival candidates, and  the public  could have their say on polling day, in the knowledge that if the they do not like the result they will have the chance of throwing their chosen President out at the subsequent election.

Without such a prior democratic exercise, I fear there will not be enough popular solidarity across borders  to sustain a Complete Economic and Monetary Union of the euro zone countries.

WHAT TRUMP, SANDERS AND OTHER POPULISTS ARE NOT TELLING YOU ABOUT GLOBAL ECONOMICS

globalThe integration of the global economy is under threat. Not only is the UK considering leaving the EU, but all four US presidential candidates want to renounce President Barack Obama’s Pacific trade deal. Borders within the EU are being closed, and Donald Trump even wants to build a wall between the US and Mexico.

Meanwhile, political parties have become empty shells, unable to sustain support for long-term policies through more than one election. This is evident all over Europe, including in Ireland.

These two factors are linked.

The globalisation of the economy is at risk because its benefits have not been understood or explained clearly enough, or shared widely enough.

Globalisation happened because once capital controls were removed, capital could flow freely from one country to another. Trade barriers, quotas and tariffs were reduced or eliminated.

Advances in information technology have empowered consumers everywhere, including in the poorest and most remote parts of the world. ‘Containerisation’ enabled goods to be transported more cheaply over long distances. In terms of the number of hours one had to work to afford them, food, clothes and consumer goods became much easier for ordinary people to afford.

Political developments accelerated the process. The entry of China into the World Trade Organisation (WTO), and the gradual opening up of the Indian economy, have meant that the global capitalist economy that, in 1990, was the preserve of about one billion people in the developed world, is now open to at least four billion or more people. China’s economy is six times as large as it was 30 years ago. Competition for work has become intense. In many senses, there is now an over-supply of available labour to produce the goods and services that cautious and indebted consumers are willing to pay for.

This explains why, in the developed world, we have a low or zero inflation rate, but also high levels of unemployment.

It also explains why, while in the developing world millions of people have been rescued from extreme poverty by globalisation, in the developed world, perceived living standards are stagnating. Cash may buy more, but hourly cash incomes have not risen.

In countries with high levels of legal protection of existing jobs, like France and Spain, the burden is falling on the young, who cannot find work at all, while older workers hold onto their jobs.

In countries with less job protection, the burden is falling on older workers who have seen their incomes stagnate, as young people are recruited to replace them at lower salaries. Males in the US with only a high-school level of education have seen their incomes fall in real terms since 1970.

Globalisation is being abused by some tax avoiders. Rent seekers are capturing too much of its benefits for themselves, because of inadequate competition or undue regulatory protection.

Meanwhile, technological change is putting many existing jobs at risk, and accentuating inequality of incomes between insiders and outsiders. In the future, drivers may be replaced by driverless cars and textile workers by robots, just as dockworkers were replaced by containerisation, and filing clerks by computers.

I heard an experienced American business leader claim at a conference recently that the extra value, to his or her employer, of a really top software engineer over a merely adequate one was 500 to one, whereas the comparable difference between a top accountant and an adequate one was only two to one. The resultant competition for the top talent is one of the factors increasing income inequality.

At the other end of the income scale, people with low skills are falling further and further behind when forced to compete with goods or people coming from lower-cost countries. Immigration and imports have the same political effect.

These realities explain the support for Trump and Bernie Sanders in the US, but also the support for Podemos, UKIP, and the National Front in Spain, the UK, and France respectively.

There is a naive desire to turn back the clock, economically speaking, to the simpler world that existed before 1990, when the global capitalist economy was in the hands of the one billion people in the “West”, rather than of the four billion or more that are now able to compete in it.

The advocates of this reversal of history are not explaining what it would cost.

It could only be done by the closing in of national economies. It would require the reimposition by Western countries of high tariffs and quotas and restrictions on people’s ability to move their money to other jurisdictions. The result would be a dramatic rise in the cost of consumer goods in the developed world, and a fall in living standards in both the developing and developed world. This is the logical destination of the trade policies of Trump, Sanders, UKIP , the National Front and the Trotskyite Left.

Superficially attractive, but dangerous, policies like these are gaining support because structural factors within technology are undermining disciplined political parties, which were, in the past, the means of mobilising public opinion, and of maintaining support for more considered and realistic policies.

Twitter lends itself to the expression of strong emotion, but not to the careful explanation of a policy platform. The anonymity of the blogosphere has replaced dialogue with diatribe. Opinion is polarised. Anger becomes a policy.

Information is so plentiful now that people must be more selective in what they read, but their selections reinforce their existing views rather than question them. Society is becoming a series of self-enclosing and polarised information communities, which do not listen to one another.

This atomisation of society means that voters think increasingly as consumers rather than citizens, picking the candidates they “like” in a personal capacity, rather than the ones that have a programme that will work for the whole of society.

Ideological politics is being replaced by identity politics. This is why global economic integration is under threat. Political institutions are not strong enough to explain, manage and control global economic and technological forces.

This is the challenge facing the European Union. The EU must show the public that it can regain control of globalisation so as to preserve all its benefits, while curbing its abuses.

John Bruton is a former Taoiseach and leader of Fine Gael

Published at Irish Independent

THE UK VOTES TO LEAVE………WHAT HAPPENS THEN?

The-UK-and-EU-flags-010

Paper prepared by John Bruton, former Taoiseach, on what would happen if the UK votes to leave the EU, the procedures and options available, and the implications for Ireland , the European Union and the UK itself.  

Next June the people of the UK may vote to leave the European Union. At the moment, a narrow majority favours remaining in the EU, but a large group are undecided. That group could swing towards a “leave” position, for a variety of reasons, including what might be temporary EU problems with refugees. However temporary the reasons might be, a decision to leave, once made, would be politically irreversible.

So it would be wise for Ireland to give thought now to how it might react to a decision by UK voters to leave the EU , and how it would play its hand in the subsequent negotiations. A number of scenarios will arise and Ireland needs to identify its red lines in each one of these.

THE NEGOTIATIONS COULD ONLY TAKE 21 MONTHS

The negotiation of a UK withdrawal from the EU will be done under Article 50 of the Lisbon Treaty. It will have to be a quick negotiation because Article 50 contains a two year time limit. In practice the negotiation of withdrawal arrangements will all have to be finished in about 21 months.

From the date that the UK Prime Minister informs the European Council of his/ her decision to implement the referendum decision, the two year time limit starts to run. Assuming a June 2016 Referendum, I calculate the Withdrawal Treaty would have to been negotiated, ratified, and brought into force by July 2018.

So the negotiations themselves between the EU side and the UK side would probably have to be finished at latest by April 2018, to allow time for parliamentary ratifications.

In the event that no agreement had been reached within the deadline, the EU Treaties “would cease to apply” to the UK. The UK would simply be out of the EU, without even a trade agreement.

This would be exceptionally disruptive of the UK economy, and of some, but not all, EU states’ economies. It would be particularly bad for Ireland. Our exports to the UK would be at risk, and the border would be deepened with incalculable consequences.

UNANIMITY OF ALL EU STATES NEED TO EXTEND THE TWO YEAR LIMIT

The two year limit could be extended, but only with the consent of all 27 members of the EU. If the negotiations had become contentious, or if the UK demands bore heavily against the interests of one or two states, one could see the required unanimous consent for an extension of negotiating time being withheld.

This risk of a single refusal to extend time for negotiation, adversely affects the dynamics of the negotiation, from a UK point of view, because the UK has more to lose from failure. It is not inconceivable that a populist government in a member state might hold a time extension for the UK hostage to obtain some other unrelated matter, such as debt relief. A European Parliament in election year could also be a source of uncertainty.

While a time extension would require unanimity, the actual negotiation of the terms of withdrawal would need a “Qualified Majority” within the European Council.

NO GUARANTEE OF PROTECTION OF IRISH INTERESTS IN WITHDRAWAL TREATY

That means that the terms of the Withdrawal Treaty would need to support of 72% of the 27 EU governments, collectively representing at least 65% of the total EU population. Ireland, on its own, could not block a Withdrawal Treaty that contained terms that were against Irish interests. Nor could Ireland guarantee it would be agreed on terms that would adequately protect Ireland’s interests. For example, Ireland could not necessarily prevent passport controls or customs posts on the border in Ireland.

While 72% of EU member state governments must agree to the Treaty terms, 100% of the 27 national parliaments must do so, and ratification could become entangled in General Elections in some states in the interim.

While our fellow EU member states will undoubtedly recognise the Ireland will suffer more than any other EU state from a UK withdrawal, that does not guarantee that Irish interests will be taken into account in all cases. Quid pro Quo will apply, and that could cause difficulties on vital Irish interests on EU issues that have little direct bearing on the UK Withdrawal as such.

Given the short time involved, the UK will not have the option of pursuing a relaxed post referendum exploration of different types of external association with the EU. It will probably have to decide at the outset what form of relationship it is seeking. It will have to choose among options that do not require the EU itself to change its Treaties.

The options were well described in a recent paper by Jean Claude Piris, former legal advisor to the European Council.

OPTION ONE…..UK JOINS THE EUROPEAN ECONOMIC AREA

The simplest would be to join the European Economic Area (EEA), while leaving the EU itself. The EEA allows Iceland, Liechstenstein and Norway to take part in the EU Single Market, but without being in the EU Agricultural, Fisheries, Judicial and Foreign Policies.

In the EEA, the UK would still have to contribute to the EU budget, to apply EU Single Market rules without having the say it now has in them, and to allow free movement of EU migrants to work in the UK on the same terms as locals.

Ireland’s problem with this option would be the departure of the UK from the EU Common Agricultural Policy which would raise issues of fair competitive access for Irish farm produce to the UK market. Management of Atlantic Fisheries would also become more contentious.

OPTION TWO……THE SWISS APPROACH

Less simple, would be for the UK to seek to make tailor made agreements with the EU, like Switzerland has. This negotiation would be a very complex process where tradeoffs would have to be sought between different sectors and national interests. The Swiss model has not worked well from an EU point of view, and one could expect EU negotiators to take an exceptionally tough line if this is what the UK seeks. The issue of access to the UK labour market for EU citizens would certainly be a demand from the EU side in such a negotiation.

In practice, if not in theory, the UK would have to implement EU law in all the areas for which it sought access to the EU market. This would be very problematic from the point of view of the financial services exports from London to Europe.

Once such a deal had been concluded, the EU side would be under pressure to tilt its own internal rules to favour financial service providers in the EU itself. If a system of mutual support and mutual supervision of financial service providers existed within the EU, and the UK was not part of that, there would then be valid grounds for objecting to UK financial service providers benefitting from a market they were not supporting on the same basis as EU providers.

This could hurt London, and Dublin could be a beneficiary. Outside the EU, the UK could do little to stop this. The European Banking Authority would have to leave London and there would be a good case for relocating it in Dublin.

OPTION THREE……A CANADA STYLE AGREEMENT WITH THE EU

Another option would be for UK just to seek a trade agreement with the EU, like Canada has. This option is favoured by some of those who want the UK to leave the EU, so it needs to be studied.

The first thing to say about this is that it would have to be negotiated within the two year time limit applying to a Withdrawal Treaty under Article 50, and would presumably have to be part of the Withdrawal Treaty. The existing Canada Agreement took 6 years to negotiate and dealt with a much less complex relationship than that between the UK and the rest of Europe. It is very hard to see how all this could be done in the time frame. The European Parliament would actively involve itself in the details. The UK would be excluded from the European council discussions on the topic.

A Canada type agreement would not necessarily mean continuing tariff free access to the EU for all UK goods. Some tariffs remain on some Canadian goods for the time being.

It is unlikely that a trade agreement like this, or even a Customs Union of the kind Turkey has with the EU, would allow the UK access to the EU financial services market and financial services are one of the UK’s biggest exports.

It is clear that under a Canada style agreement, the UK would have to comply with EU rules on any goods or services it wanted to export to Ireland or to any other EU member state. The UK would have no say in the framing of these rules, but it would still be bound by them.

Of course, the UK would be free to make its own rules for goods and services sold within the UK, but the downside of that would be that UK firms would then have to operate under two different rule books, one for the UK and another for the EU, thereby adding to their costs and damaging their competitiveness.

Once a Canada style agreement had been made, the UK would be out of the EU and would have no control over any further rules on new topics that the EU might need to make.

The Canada agreement is clear that it does not restrict the EU making “new laws in areas of interest” to it.

If the Canada model was followed there would be a Regulatory Cooperation Forum to cover this sort of thing. In the Canadian model, this Forum would allow

  • “exchange of information and experiences”,
  • “only provide suggestions and make no rules” and
  • “not have decision making powers”.

In other words the UK would be in a worse position than it is as a voting member of the EU.

If , after the UK had withdrawn, the EU deepened its service market further, allowing new access rights across border for service providers within the EU, the UK would miss out on this and would have to negotiate access for its service providers on a case by case basis.

The rights of the 1.8 million UK citizens now living in EU countries would also be less secure. UK citizens, living in Ireland or the continent, would enjoy only what Canadians enjoy.

WHAT WOULD HAPPEN TO EXISTING EU TRADE DEALS, AND TO EU LAWS NOW ON THE UK STATUTE BOOK?

Furthermore, the UK would have to start from scratch negotiating trade agreements with countries all over the world, to replace the trade agreements it now has with all those same countries as a member of the EU.

The UK Parliament would certainly be busy as well, in that it would have to pass new UK laws to replace all the EU regulations that are now part of UK law.

The only alternative to this would be for the UK to decide to leave all the “acquis” of EU rules and regulations, which are now supposedly so objectionable, on the UK statute book, as they are, for a long time to come.

One proponent of UK exit from the EU, Lord Lamont, admitted, in a debate with me recently, that this is what they would have to do.

Leaving the EU, only to leave EU rules on the UK statute book, seems like a lot of trouble to achieve very little!

A SECOND REFERENDUM?

There would be no second referendum on the final terms of any Withdrawal Treaty.

This has been made clear by Chancellor Osborne. That has to be his position because, if there was to be such a referendum, the choice would presumably be either to leave on the basis of the terms of withdrawal Treaty, or stay in on the basis of the EU membership exactly as it is today.

If such a second referendum was formally in prospect, it is hard to see that the EU side would have any incentive at all to offer the UK any concessions at in the Withdrawal Treaty negotiations. They would be mad to do so, because all the concessions would achieve, would be to make withdrawal more attractive.

CONCLUSION

I believe that the architects of the UK’s renegotiation/referendum strategy did not adequately consider how hazardous the voyage is, on which they have so casually embarked. They may have overestimated the EU’s political capacity to devise yet another special deal for the UK.

Ireland, for its part, will have to adopt a very tough, deliberate, and multifaceted negotiating strategy, as long as this avoidable uncertainty prevails.

WHAT WILL HAPPEN IF UK VOTERS DECIDE TO LEAVE THE EU?

Residents of Northern Ireland will have a vote sometime next year on one of the most important issues to affect these islands, and indeed all the nations of  Europe, namely whether the United Kingdom is to remain a member of the European Union, or leave.

A BIG DECISION…BUT TORY PARTY REMAINS NEUTRAL 

As I speak tonight, the UK government has yet even to put in writing what it wants changed in the EU.

Yet, regardless of what it seeks or what it gets, the Conservative party, which forms the government, has surprisingly said it will remain neutral in the referendum anyway. In other word, it is asking individual voters to  study, and decide upon, an issue in which their party itself is unable, or unwilling  to make a decision.

This is an example of the weakening ability of political parties in western democracies generally to lead, inform and mobilise public opinion. Rather than lead opinion, political parties react to it, a trend that is dangerous for the future. 

A TIGHT TIMETABLE, AN EXTREMELY COMPLEX ISSUE…AND A  VERY SHORT CAMPAIGN

I expect the UK will make a presentation of its requests at the October EU Summit, and aim to wrap up an agreement at the December Summit. 

Only after December, will any  positive case for continuing UK membership of the EU be made to the public, in what, given the inevitable complexities, hypotheses, and uncertainties to be explored and explained, will be a very short  referendum campaign. Examples in Ireland show how unpredictable referenda can be, and how difficult it can be to adequately inform voters on issues which are, of their very nature, complex, hypothetical, contingent on the reaction of others,  and uncertain. 

And, even if the UK referendum decision is to remain in, will that satisfy today’s Euro sceptics?

Will the UK always remain, psychologically, on the sidelines of the EU?
After all, no other country in the EU has so far demanded new terms for itself, as a price for staying in the EU. Could the EU exist for long if every EU state adopted the UK approach?

WHY THE EU IS WORTH PRESERVING

The European Union has evolved and developed over the past 70 years. 

But its goal from the outset has been, and remains, to cultivate so much mutual dependence between European states, that they could never go to war with one another again, as they did with such disastrous consequence in 1914-18 and 1939-45.

More than any other part of this island, Ulster has suffered when European peace was shattered ….the losses on the Somme, and the repeated bombing of Belfast come to mind.

A decision by the electors of the UK to withdraw from the EU would be a huge blow to the EU. That is where the debate should start…what sort of Europe to we want? What sort of Europe will be feel safe in?

A precedent has already been set by the decision of the UK to demand new terms for itself, under the shadow of an in/out referendum.
Let us look down the road and see where it is leading, and if that is really somewhere we want to go.

UK WITHDRAWAL THREAT HAS ALREADY DAMAGED THE EU

The precedent  of a major European country, an EU member of 40 years standing which already decided by referendum in 1975 to stay in the EU, deciding for a second time to seek special terms for itself, with a threat of withdrawal is damaging already.

But what of the further precedent that may yet be set.

That precedent would be of a major country withdrawing altogether from the European Union, because its voters felt the special terms it got, were not good enough?

The consequences of that for the cohesion of the EU itself are unknowable, but probably would be quite dramatic.  It would most certainly weaken the EU. 
Some may shrug their shoulders at that, but should they?

The UK precedent could be immediately seized upon by Madame le Pen in France who would seek a renegotiation of the French terms of membership. 

Geert Wilders in the Netherlands would not be far behind in saying that anything the UK can do, the Netherlands can do too.

EU HELPS EUROPE DEFEND ITS INTERESTS IN THE WORLD

The EU, as a force that can protect and unify European interests in trade, intellectual property, environmental standards, that has already been weakened, by the uncertainty around a the UK renegotiation and a referendum, would be weakened further.  

All over the world, those who do business with the EU would begin to wonder….is the EU going to break up?  Are others going to follow the UK out the door?

In a world in which Europe is becoming a smaller force, economically, politically and in population, a weakened EU would probably not be in the interests of Europeans, whether they live in Belfast or Bratislava, in Downpatrick or in Dubrovnik.

A disunited Europe, of 28 or more separate countries, pursuing their own agendas would become a playground for outsiders seeking advantage and playing one off against the other.

Vladimir Putin would be happy.

So would Europe’s small number of potentially monopolistic energy suppliers, who could then more easily play one  European customer off against the other.

Europe’s borders could again become barriers behind which criminals could hide.

So I would ask you,  you who will be deciding this question…to consider not only how the decision will affect yourselves, or  affect your local or national community, but also to consider how it will affect Europe as a whole, and its place in the world.

EU EXIT WOULD CHANGE THE UK ITSELF AND WEAKEN ITS ECONOMY

Northern Ireland voters also ought to take some account of the effect of a UK exit in your more immediate neighbourhood.

A study by the Centre for European Reform said that UK EU membership boosted UK goods exports by 55% over what they would be if the UK was outside the EU. 
That is a boost of £130 billion, which is three times as much as total UK exports to China. 

The UK’s National Institute for Economic Research estimated that leaving the EU would subtract 2.25% from the UK GDP. 

The losses would not be evenly spread. Regions in the UK which rely on services exports would lose least because the EU does not impose tariffs on services imports. But regions where manufacturing is important would be hit the hardest.  

The Centre for European Reform in London has calculated that, if the UK leaves the EU and if existing EU tariffs were then to be imposed on UK exports, the North East of England, with its big manufacturing base, would lose the most, the equivalent of 0.4% of its private sector output each year.  

Northern Ireland and the East Midlands would lose 0.35% per tear of their private sector output, but London, with its big tariff free service sector, would lose only 0.1% . Northern Ireland would lose almost twice as much as Wales would.

Some might argue that this will not happen because they assume that, even if the UK left the EU, it would be able to keep full free access to the EU market.  Maybe, maybe not. 

UK COULD ONLY KEEP ACCESS TO EU MARKETS IF IT MEETS EU TERMS

Switzerland has indeed negotiated tariff and duty free access to the EU market for its exports, but, in return it has had to accept immigration from the EU, contribute to EU funds for poorer regions, and has had to accept EU standards, in which it has no say. 

Given that these are precisely the sorts of thing that the UK objects too now, as a member of the EU, it will be difficult for UK to agree to pay that price for access to the EU Single market as a non member.

Remember the negotiation of the UK’s exit terms, after a referendum decision, will be a time limited negotiation where others can play brinkmanship too. 
And bear in mind that an EU/UK trade negotiation will not be a negotiation of equals. 

The EU sends only 7% of its exports to the UK, whereas the UK sends 45% of its exports to the EU. One must ask if other EU states would want to create a precedent of giving terms to the UK that it has refused to Norway and Switzerland, as non member.

If the UK exit terms are too generous, the precedent might encourage other states to leave, which of course they too are perfectly entitled to do.
If the UK leaves the EU, the world will not stand still.

At the moment, UK exporters benefit from any present or future trade and investment deal made by the EU, for example the mega trade and investment deal in prospect with the US. UK negotiators have an input to the terms. Outside the EU, they would have no say.

As a Union of 500 million, relatively prosperous, consumers, the EU has clout in such negotiations.

Without the UK, the EU would have less clout.

But the UK on its own will have even less clout than a diminished EU. Both of us would lose. And our competitors in Asia, the Americas, and elsewhere will gain. 

UK EXIT WOULD WEAKEN PUSH TO COMPLETE SINGLE MARKET

On the positive side, UK membership is vital if the EU is to complete its Single Market, particularly in services, especially digital services. Without the UK in the EU, protectionist forces would hold greater sway, and that would be a loss for UK exporters to Europe.

The organisation “British Influence” has estimated that completing the EU Single Market could add 1.8% to the overall EU GDP, but it has gone on to estimate that completing the EU Single Market it could add 7% to the UK GDP (assuming the UK is still in the EU)! 
Without the UK, support for moving towards a full EU Single Market will be much less.

Ironically one of the reported UK renegotiating goals, a veto on EU laws for a minority of national Parliaments, would most likely be used by others to block the completion of the Single Market, from which the UK has so much to gain.

Referring to the North East of England, The CER noted that “ironically regions that have most to lose from leaving the EU tend to be the most Euro sceptic”.

So it may be impossible, in a short referendum campaign, to convey all of these complex facts and risks to the electorate, given that there is so little knowledge of the value of the EU market, and the message will have to be conveyed through the medium of a press, much of which is viscerally anti Europe anyway. 

IMPACT OF BREXIT ON NORTHERN IRELAND WORSE THAN ON  MOST OTHER  PARTS OF UK

Coming closer to home, what might be the impact on Northern Ireland itself of the UK leaving the EU, and presumably taking Northern Ireland with it?
Unless the UK can negotiate a special trade deal, like Switzerland and Norway have, and I have already indicated the difficulties with that, customs posts would have to be erected along the border again. 

That would disrupt lives, and it would disrupt business.

Many firms process raw materials originating in the Republic here, and vice versa. All that would have to be subject to customs inspection, a costly and intrusive process.

If the UK wanted to restrict EU immigration from across the land border, it would have to institute passport controls within Ireland…..something that never happened in history before.

Smuggling would undergo a revival, with endless profit making opportunities would be opened up for subversives and organised criminals.

I have attended a number of debates in London of the possibility of Brexit, and have been surprised by how little notice is taken of the implications for Northern Ireland. Similarly little notice seems to be given to the effect of the UK leaving the EU on Scotland, or to the consequent effect  on the Union itself, a matter of concern to a significant section of the population in Northern Ireland.

Given the difficulties that exist, as things stand, in applying UK budget limits to Northern Ireland, one must also wonder where funds will be found to replace the EU Single Farm Payment for Northern Ireland farmers,  the EU rural development funds coming here, as well as  the EU Regional Fund monies.

The report prepared for the Northern Ireland Assembly by the Open University Business School, which I commend, says that between 2007 and 2013, a total of £2.42billion in EU funds came to Northern Ireland, of which £1.2billion was Single Farm Payments.

Will the UK be able or willing to replace that, especially if it still has to contribute to the EU budget as a non member, to get access to the EU Single Market?

I have focussed, so far, on the problems that might face the UK if it leaves. 

REPUBLIC WOULD SUFFER TOO

But my former constituents in Meath would not be unaffected.
We would lose a friend in Europe if the UK leaves.
We would lose the common EU framework for the whole island that has contributed so much to peace, and is specifically acknowledged in the Belfast Agreement.
Our tourist industry would suffer if barriers have to be placed on the border again.
But, we, south of the border, will have little say in the decision. You will.

As I said at the outset, I hope you will think of what will be best for yourselves, but also what will be good for Europe as a whole, for the rest of the UK, and, I hope, for the rest of this small island on which we all live.



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Speech by John Bruton, former Taoiseach, at the annual dinner of the Council of the Incorporated Law Society of Northern Ireland, in the Ulster Museum, Belfast at 10.30pm on Friday 25th September .
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