John Bruton

Opinions & Ideas

Category: John Bruton (Page 2 of 4)

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.

INDIA….A DEMOCRATIC MIRACLE

parmesh04I recently read a history of modern India, entitled “India After Gandhi” by Ramachandra Guha.

It is a very big book, about a very big country.

Although it runs to almost 800 pages, it is well worth reading in full.

India is already the seventh largest economy in the world, is growing at 7% a year, and could be the 3rd biggest economy ten years from now.

It is a large exporter of software, and it will surprise many to learn that it is also the largest producer of milk in the world.

Guha’s book shows how India survived as a democracy, and remained united, while authoritarian regimes elsewhere broke up.

Although India obtained its independence peacefully, civil disturbances after partition meant that the new Republic of India had to absorb 8 million refugees from what is now Pakistan. Democracy has taken secure root in India. Voter turnout in the first national election, in the late 1940s, was 46% and it has been increasing ever since.

Initially the Congress party dominated the political scene and pursued a socialist and protectionist economic policy. Since the early 1990’s, that approach has been reversed. Congress is no longer dominant, and political power has been dispersed among numerous parties. This has made decision making more difficult.

Like Ireland in the 1960’s, India in the 1990s, opened itself up for international investment and trade. This has contributed to the rapid economic growth in the country.

Even more rapid growth is possible because, unlike China, India has a youthful population.

It’s economy is still held back by excessive bureaucracy and corruption. If those  artificial obstacles can be removed, India can become the driver of growth for the global economy.

Understanding the diversity of India, with its numerous languages, races,  and religions, is important to anyone who wants to do business in the county.

THE IRISH PARTY RESPONSE TO THE RISING

Thomas DArcy McGee Summer SchoolHistory does not repeat itself, but it can teach us lessons.

Theresa May will face a similar problem in 2017, to the one faced by John Redmond and the Irish Party in the 1910 to 1918 period.

Theresa May is trying to gain independence for her country from a bigger Union. But a geographically concentrated minority of her people want to stay in that Union, in this case, the people of Scotland and Northern Ireland.

John Redmond wanted independence for Ireland from another Union. In his case, a resolute, and also geographically concentrated, minority wanted to stay in that Union. They were a majority in Down, Antrim, Derry and Armagh.

Similar problem, 100 years later.

Theresa May wants access to the market of the Union she is leaving, and to get it she may have to continue to accept some of the rules of the Union.

John Redmond had to do likewise, although he, unlike Theresa May, under the deal he won would have continued to have some input to those rules.

Each represent, or represented, smaller entity seeking separation from a larger one.

So, to get a good deal for exit, both need, or  needed, to know, understand, and work the politics of the Union they wanted to leave.  In this task, The Irish Parliamentary Party, of 100 years ago, did a markedly better job, than the British Conservative Party has done so far.

As the Brexit negotiation continues, Theresa May even may have to contemplate a partition of the UK.

This partition might exclude Scotland from some, or all aspects of UK law, if Scotland insists on remaining in the EU. This could be a price Theresa May might have to pay for willing consent by Scotland to the rest of the UK leaving the EU. Again similar to the problem John Redmond faced.

But, all in all, Theresa May’s challenge is the easier one.

Hers is a purely political problem. Her country is at peace, and the possibility of consent to Scotland going its own way has been conceded by her predecessor.

John Redmond had to contend, on the other hand, with the existence of two private armies in Ireland on either side of the debate.

He had to contend with a wider world in the midst of a World War.

He also had the difficulty that the principle of consent (the legacy of a more recent peace process) had not yet been invented.

I will explore these parallels further in this paper.

WHAT SHOULD WE COMMEMORATE?

Turning back to our own decade of centenary commemorations, we should reflect on something President John Kennedy once said.

He said a “nation reveals itself” by the events it chooses to commemorate.

This state is a rule of law based, parliamentary democracy, which has integrated itself with its European neighbours by peaceful negotiation and compromise. It is militarily neutral, and the military power is subordinate to the civil power.

 If we decide that we were to pick from our history a “foundation event”, and choose as that foundation event the 1916 Rebellion and Proclamation, does that accurately reflect, or reveal, who we really are today in 2016?

 Is the 1916 story a practical inspiration for Irish people as we navigate a process of reconciliation within Ireland, and of shared sovereignty, within Europe?

SHOULD WE NOT PRIORITIZE PARLIAMENTARY AND PEACEFUL ACHIEVEMENTS?

 Perhaps we should instead seek inspiration from the non violent achievements of a century ago,

  •  the enactment of Home Rule,
  • the ending of landlordism,
  • the establishment of the National University
  • the introduction of old age pensions and
  • National Insurance….

all parliamentary, and non violent  achievements, in which the Irish Parliamentary Party of John Redmond, John Dillon,  Joe Devlin, and, at times, of the North Louth MP, Tim Healy played a big part.

If one scrutinises the record of debates in the House of Commons, now available on line, one gets a sense of the practical patriotism of the (unpaid) Irish MPs who travelled to London to represent their constituents and their country.

Tim Healy’s successor as North Louth MP, Augustine Roche, was particularly busy on the land question, seeking new holdings for those who had lost their farms, and looking for a larger grant for road works for Louth County Council.

His successor, the 22 year old Irish Party MP, Paddy Whitty, elected in February 1916 and  the last person representing this area to sit in Westminster, raised questions about the conditions of post 1916 detainees, the tragic collision of two ships in Carlingford Lough in 1916 because of poor wireless communications, and the poor pay rates of carpenters in the GNR railway works….not the stuff of poetry, but practical matters, still relevant today.

Constitutional nationalist politics in Louth was far from dull, because of the split at national level between Tim Healy ( up to 1910 the North Louth MP) and William O Brien on one side, and the majority of constitutional nationalists, led by Redmond and Dillon, on the other.

For example, in 1910 Healy, having been defeated in North Louth by a Redmondite, Richard Hazleton, launched an election petition, alleging bribery and intimidation of voters, and demanding his opponent be unseated.

He won this case, and a Healy supporter, Augustine Roche, won the seat in the re run.

The Catholic Church exercised a strong influence in Louth politics, usually in favour of nationalist political unity rather than on religious matters as such.

The hotly contested character of elections in Louth actually strengthened constitutional nationalism in the county, and explains why constitutional nationalism held its own here against Sinn Fein, even in the 1918 General Election and in the 1920 local elections.

I now turn to the Irish Party’s response to the Rising.

After the Rebellion, on 11 May, John Dillon MP spoke in the House of Commons of his opposition to it, and of how Irish Party MPs had persuaded some of their constituents not to take part.

 He said nine out of every ten Irish people were opposed to the rebellion.

 But he condemned the house searches in parts of the country where there had been no trouble at all.

 He said his prime object was to stop the executions. He said the river of blood was undoing the work of reconciliation on which he and his party had worked so tirelessly. His party’s success, in ensuring the passage of Home Rule into law  after 40 years of  peaceful agitation, had created a new atmosphere between Britain and Ireland, and he argued that that was being undone by the repression.

 He recalled that when the American Civil War ended, Abraham Lincoln did not execute anyone. He said Premier Botha had put down a pro German rebellion in South Africa without any executions. This was an apt comparison in many respects.

 To put the Easter Rising in its proper context, one must draw attention to a few important points.

IRSH PARTY STOPPED CONSCRIPTION, PASSED HOME RULE, AND ENDED LANDLORDISM

Earlier in 1916, the Irish Party had, by political methods, prevented conscription being applied in Ireland, while it was being applied on the entire island of Britain.

A year and a half earlier, on September 18th 1914, it had had another vital parliamentary achievement which invalidated the case for a Rebellion.  The principle of Irish legislative independence for Ireland was won, by the passage into law of the Home Rule Bill. That centenary was not properly commemorated by the state in 2014

That happened BEFORE any rebellion here, and, as Conservative leader Bonar Law subsequently admitted, there was no going back on Home Rule.

The principle of Irish legislative independence was won, without a shot being fired.

 Likewise, before a shot was fired in 1916, the effective ownership of the land of Ireland into the hands of those who were working it, and landlordism abolished. In terms of land ownership, the Cromwellian conquest had been reversed….peacefully.

 Indeed it was the Irish Party’s achievement of land reform, which created an Irish rural middle class, something that enabled Ireland to remain democratic in the 1920’s and 1930’s, when so many other new European states, where landlordism had not been abolished, became authoritarian.

 The only open questions in 1914 were whether, or how, Home Rule might apply to Antrim, Down, Armagh and Derry (and perhaps Fermanagh and Tyrone). If some counties were excluded, would the exclusion would be temporary or permanent.

 But if that exclusion was once accepted, there was no barrier in the way of the rest of Ireland progressively winning ever greater degrees of sovereignty, starting from the platform of Home Rule.  Just as the 1921 Treaty turned out to be a stepping stone to greater sovereignty by peaceful negotiation, so too could Home Rule have been, if that was what the voters here wanted.

HOME RULE APPROACH WOULD HAVE BEEN BETTER FOR NORTHERN NATIONALISTS

 Home Rule, in the form passed into law in September 1914, did not guarantee a united 32 county Ireland. The question of exclusion of 4 or 6 counties from Home Rule was left open to be decided by a vote of the people in each county.

But all subsequent attempts to coerce Northern Ireland into a United Ireland, whether by the attempted incursions across the border in 1922, by the propaganda campaign in the late 1940s, or by IRA killing campaigns in the 1950’s and from 1969 to 1998, all failed, because they were based on a faulty analysis of the Ulster Unionist mind.

Looking back with the benefit of hindsight, I do not know how Irish nationalists, of any persuasion, really thought rule from Dublin could ever have been workably imposed on Unionists in places like Antrim and North Down. Did they expect

 + the British to coerce the Unionists,

 + did they expect to be able to coerce them themselves, or

 + did they  think these Unionists were just bluffing?

All three of these scenarios are politically unreal, and building a national ideology on something unreal is not healthy. They are the great unexamined questions at the heart of Irish nationalism.

An unwillingness to accept the real answers to these questions persists widely to this day.

John Redmond’s policy was one of attempting to persuade Unionist to accept a United Ireland, not to coerce them. His support for recruitment to the British army in 1914 was part of a (probably naive) attempt to persuade Unionists that they would not be sacrificing all their loyalties by taking part in Home Rule.

But, under the arrangements being considered in 1914, if an Ulster county opted out of Home Rule, they would have continued under direct rule from Westminster.

There would, under the formula being considered in 1914, have been no Stormont Parliament, no “Protestant Parliament for a Protestant people”, no B Specials, no discrimination and no gerrymandering of local government, because that would have been prevented by direct rule.

The concept of a separate Northern government and parliament only came onto the agenda in late 1919, after most of the rest of Ireland had rejected Home Rule and voted for complete separation and abstentionism in the 1918 General Election.

That closed the door on compromise, although I am not sure that all those who voted for Sinn Fein, and against the Irish Party, in December 1918 really understood all that would follow, between the opening of hostilities at Soloheadbeg in January 1919, when RIC members James McDonnell from Belmullet and Patrick O Connell from Coachford were shot, and the eventual end of the agony in 1923.If they had known or been told what would follow, would they have made the same decision?

BALANCING THE LIMITATIONS OF HOME RULE AGAINST THE COSTS OF VIOLENCE

Many of the limitations on the Home Rule powers could have been removed by negotiation. They were not of a character that justifies all the suffering that flowed from the decision to take the path of violence in 1916. That is, of course , a value judgement, but one must be able to make value judgement about history.

Some of the limitations (eg. The exclusion of Marriage law and tariffs) were only put therein the original bill, to reassure Ulster Unionists, when it was envisaged that all 32 counties would be fully included from the outset.

Other limitations would have been financially beneficial to a new Irish Administration, such as the exclusion of the financing of Old Age pensions and of Land Purchase Acts. This is because of their net financial cost, as Ernest Blythe was to discover in 1924 when he had to reduce Old Age Pensions, and Eamonn de Valera found in the economic war over land annuities.

Home Rule was not brought into force immediately on its passage into law in 1914 because it was felt that it would distract from what was expected to be a short duration war effort.

That postponement was not controversial in Ireland at the time. Indeed John Dillon had said “No rational man would expect the government to set up an Irish Parliament while war was raging”.

That said, Home Rule could have a come into effect in late 1916, and Carson had agreed to it on the basis that the six counties would be excluded for the time being, and would be administered directly from Westminster.

It did not happen because some Conservative members of government, Lansdowne, Selborne, and Long, objected because of the disturbed state of the country, a predictable consequence of the Rising, and the fear that Germany might again exploit the situation, as they had attempted to do earlier that year.

The effect of the Rising on wartime British opinion probably helped the objections being made by Long, Selborne and Lansdowne.

This disappointment, and the radicalisation brought about by the Rebellion, led to a hardening of the position of the Irish Parliamentary Party, so that by March 1917 they were unwilling to accept Home Rule involving any form of partition(temporary, indefinite or otherwise).

The  alternative path of violence, started upon by Pearse, Connolly, Clarke  and others in 1916, and followed from 1919 to 1923 by their imitators, was traversed at a terrible price.

I believe the Irish Parliamentary Party knew this, and so did the majority of the Irish people who opposed the Rising at the time, and by those who continued to support constitutionalism in the 1918 Election.

The Dundalk Democrat described the Rising as “an act of madness”.

The local authorities in Louth took a similar view. They would have realised that once violence is introduced into the blood stream of politics, it is very hard to get it out again. So it has proved.  Even those who initiated the violence began to recognise their error.

As early as 1924, a member of the IRB Supreme Council at the time of the Rebellion,  PS O Hegarty said of the decision to use violence in 1916.

“We turned the whole thoughts and passions of a generation upon blood and revenge and death; we placed gunmen, mostly half educated and totally inexperienced, as dictators with powers of life and death over large areas.” [1]

AN APPRAISAL OF THE WORDS, AND ASSUMPTIONS, OF THE 1916 PROCLAMATION

Violence, once initiated, tends to persist because of psychological as well as political factors.

Psychologically, once one has killed, or seen colleagues die, in a particular cause, it is very difficult to stop pursuing that cause, without feeling one has somehow betrayed the dead.

Politically, the absolutist wording of the 1916 Proclamation itself, made compromise almost impossible for some.

The Proclamation said the Republic existed, once  it was declared outside the GPO. The proclaimed Republic was a “Sovereign Independent State”, presumably of 32 counties.  No room for compromise there. The Rising was not to fight FOR a Republic, which would have left some room for compromise, but to  DEFEND one that had been proclaimed to exist already.

 Such a state does not even NOW exist.

Yet its existence was declared to “indefeasible” in the words of the Proclamation. That proved to be a recipe for endless conflict.

 It is on the strength, and in pursuit, of that  unqualified claim in the Proclamation, that people continue to be killed, including Adrian Ismay earlier this year.

The phrases used in the Proclamation, which our schoolchildren are now being asked to regard as the founding stone of our democracy, left little or no room at all for democratic negotiation or compromise. Therein lay the seeds of Civil War because, in politics as in life, compromise and negotiation are essential.

The men in the Four Courts in 1922,resisting the Provisional Free State government,  and those who resisted compromise in the more recent peace process,  all felt themselves sincerely bound by the absolutist and uncompromising words of the Proclamation, and the oath they had taken to defend what it has proclaimed.

Rather than the Republic being proclaimed in the name of a living Irish people, whose opinions had first been taken into consideration, it was proclaimed in the name of

“God and the dead generations”,

 neither of whom could, of necessity, be consulted about what they meant.

 The rights of the proclaimed Republic were not conditional on consent, but were

 “sovereign and indefeasible”.

 The Nation, was treated, in the wording of the Proclamation, as something separate from the people, or their views.

Many of the 1916 participants had taken an oath of allegiance to the Republic, which again made compromise difficult and conflict interminable.

THE ULSTER PROBLEM WAS CULPABLY IGNORED IN THE 1916 PROCLAMATION

Home Rule could have been in effect, possibly from the 1880’s on, were it not for the resistance to it in North East Ulster. John Redmond and other had wrestled with this problem for years, and, in Easter Week of 1916, it was the only unresolved issue concerning the implementation of the Home Rule Act.

These Ulster difficulties were fully known to the signatories of the Proclamation. But they were not addressed in a serious way in the Proclamation.

 The only oblique reference to the Ulster problem was the promise to cherish all the ”children” of the nation equally, and to be “oblivious of the differences carefully fostered by an alien government”.

 It is worth reflecting on the words used here.

Ulster Unionists were “children” of the nation, and normally children, in that era were expected to be obey.

 The wish of Ulster Unionists not to be governed from Dublin, was assumed by the Proclamation’s signatories, not to be something they had decided  themselves, but only the result of “careful fostering” by an “ alien government”. This did not show much respect for the seriousness, or the  reasoning powers, of those who had signed the Ulster Covenant, only five years previously.

 The problems of Ireland, as it was at the time, were not thought through by the authors of the Proclamation. That was a serious omission, particularly when it is followed by the taking of human life.

WAR SHOULD ALWAYS BE A LAST RESORT

Given the value Irish people place on each human life, those who take a life, have the primary burden of proof to discharge. It was for them to prove that no other way was open.  Other options must have been exhausted.

 That that test was not passed by those who initiated the Rebellion in 1916. The possibilities of Home Rule, already law, had not been exhausted ,or even tested.

 The use of force should always be a last resort.  It was not.

For every Volunteer killed in 1916 (including those executed afterwards), three Dublin civilians died.

The first casualty to die, on Easter Monday, was James O Brien, an unarmed DMP policeman from Limerick, shot in the face at the gate of Dublin Castle.

Another early unarmed DMP casualty of the Volunteers was Michael Lahiff, a 28 year old Irish speaker, from the West of Ireland, shot in cold blood on St Stephens Green.

Michael Cavanagh, a Dublin carter, who tried to retrieve his cart from a Volunteer barricade, was executed by the Volunteers.

The only casualty, on any side, in County Louth in 1916 was Charles McGee, an RIC constable, and also a native Irish speaker, who was from Donegal, who was accidentally shot dead on 24 April while a captive in the care of the Volunteers at Castlebellingham.  He is buried in Gortahork and has recently been the subject of a biography in Irish by his grand niece Madge O Boyle

 These were not “Brits”.

 They were Irishmen.

WHY HOME RULE WOULD HAVE BEEN A STEPPING STONE TO GREATER INDEPENDENCE

 The Home Rule Parliament, if it had come into being in 1916 or at the end of the Great War in 1918, would probably have been elected under the wider suffrage that applied in the 1918 General Election (all men over 21 and women over 30).

With this wide electorate, not only the Irish Party of John Dillon, but also Sinn Fein, the Irish Labour Party, and the group led by Tim Healy, would have got seats.

 All four groups would have pressed for ever greater degrees of independence, going beyond the Dominion status, negotiated after such loss of life in the Treaty of 1921.

TREATY OF 1921 ADOPTED DILLON’S POLICY OF 1918

In the 1918 General Election, which Sinn Fein won, the policy of the Irish Party, led by John Dillon, was Dominion Status for Ireland.

That was the policy on which Richard Hazleton contested the Louth constituency for the Irish Party against the Sinn Fein candidate JJ O Kelly. Hazleton lost by only a tiny margin of 1% in an electorate of 30000. That is what Dillon and Hazleton would have worked for if they had been elected

 The policy of Sinn Fein in that Election was, in contrast, immediate and complete separation of the 32 counties from the UK, on the basis of the 1916 Proclamation.

Sinn Fein won the election, on this “no compromise” agenda, but, after all the killing in the War of Independence, all they ended up with, under the Treaty, was Dominion status, the very policy of their John Dillon and Richard Hazleton in the election three years before.

It is said that Home Rule would have left British forces on Irish territory. But so also did the Treaty. It left the UK military in control of ports on Irish territory.  But these ports were handed back in 1938, through entirely peaceful negotiation.  The fact that those ports could be won back by purely peaceful negotiation on the eve of World War Two, shows that the limitations on Home Rule could also have been negotiated away, peacefully.

The use of force in 1916, and from 1919 to 1923, did not serve the interests of northern nationalists.

If a nation is to learn anything at all from history, it must be willing to examine, using all it knows now, what might have happened, if a different historical choices had been made. Otherwise there is little point studying history.

 The choice to use force in 1916, and again in 1919, must be subjected to reappraisal, in light of what  we can now  see  could have been  achieved without the taking of life .

[1] PS O Hegarty, The Victory of Sinn Fein (Dublin Talbot Press 1924) page 91

Speech by John Bruton, former Taoiseach, at a Seminar on “1916 and Revolutionary Republicanism” at the Thomas D’Arcy Magee Summer School in Carlingford, Co Louth at 10 am on Monday 22 August

ITALY……..EUROPE’S NEXT BIG CHALLENGE

Screen Shot 2016-08-08 at 17.31.08Now that the UK has decided to leave, the next big problem facing the EU is the constitutional reform referendum in Italy later this year.

In April the Italian Parliament has passed a package of constitutional reforms.  They were designed to improve the efficiency and stability of the Italian state, and reduce the ability of the Italian Senate to bring the government down.

Although  the package passed, it did not get  the required  66% majority in both Houses  to come into  immediate effect.

The only way the package can come into effect now, is if it is approved by the Italian people in a referendum.

The Prime Minister, Matteo Renzi, decided that this referendum will take place this autumn, and he has gone further and said that, unless the people approve the proposals, he will resign.

David Cameron’s recent failed  referendum gamble makes this look now to be  a more risky decision than when it was taken.

The proposed constitutional  reforms  include

  • reducing the size of the Senate
  • reducing the power of the Senate  both  to block legislation that has been passed by the Chamber of Deputies, and to bring down the government
  • reducing the power of Italian regional governments

Major reforms of the Italian state are urgent because the debt of the Italian state is 130% of GDP, and the state has to find resources for an ageing population, and influx of refugees, and bank rescue.   The Senate has proved to be an obstacle to some reforms.

Reforms are needed to increase the overall productivity of the Italian economy.  This  requires

  •  a simplification of the tax code,
  • less taxation of work and more on property,
  • simpler public administration and
  • a simpler and more efficient courts system.

State owned enterprises also need to face  more competition, as do some professions and retailers.

Before it joined the euro, Italy was able to devalue its way out of short term problems, as the UK is doing now. But devaluation  enabled it to avoid making big and difficult reforms.

Since it joined the euro, Italy has reformed its previously unviable public pension system, a task Ireland and the UK have yet even to discuss seriously. So Italy’s underlying ability to make big reforms should not be underestimated.

The polls on how Italians will vote in the referendum are very volatile.

The proportion in the “Don’t Know” category ranged from 19% to 42% in the two most recent polls.

Furthermore Prime Minister Renzi’s party lost ground in recent city elections, including in Rome.

Renzi’s main opponents are the “ 5 Star” Movement, who make their policies, and select their candidates, by polls over the internet. They reject the idea of career politicians and prefer politicians to be amateurs, who do the work on a short term basis. This sentiment is similar to the rejection of the opinion of “experts” and “elites” in the recent UK Referendum.

The trouble with amateur politicians is that, while they may have good ideas, they may lack the necessary technical ability, and staying power, to see their ideas through to full and effective implementation.

Italy is the 8th largest economy in the world. It has an excellent quality of life, and a great reputation.

Unfortunately its state system does not work well and there is not enough political consensus to put things right. This is not a weakness that Italy can afford. It needs a strong and effective state.  A rise in the price of fuel, or in international interest rates, could cause a big crisis for Italy, unless it has a state that is capable of making and fully implementing difficult decisions.

That is why Prime Minister Renzi’s referendum is so important for Italy, and for Europe.

 

 

THE UK NEEDS TO WORK OUT WHAT IT VOTED FOR LAST MONTH

union-jack-1027896_960_720I believe the UK itself needs to prepare a realistic proposal, taking the EU Treaty obligations of others into account, on the future relationship between the EU and the UK that it believes would be in the interest of both the UK and the EU.

That is a process that has to take place in the UK alone and not, at this stage in the other EU countries.

The UK needs to do its home work first. The UK needs to take full ownership of the challenge posed by decision in the referendum that the UK itself decided to have .

My own sense is that a relationship between EU and UK that is limited to trade in goods, and to free travel with passport controls, is easily attainable, if the UK is willing to accept EU goods safety standards.

The question is whether the UK would settle for that.

Services and movement of people are inherently inter related so this would not cover financial services exports from the UK.

On migration, the UK position is made difficult by the fact that the UK long pressed for early EU enlargement, and then, like Ireland, opened itself the migration from the new EU members without availing of the transition period.

Now, without acknowledging its own contribution to the dilemma in which it finds itself, the UK has decided to reverse all this by leaving the EU, as if the EU alone was responsible for the consequences of these UK decisions.

I fear that these contradictions within the thought processes of the UK itself will not be resolved without some sort of crisis.

From what I read, it seems to me that UK leaders are still going around the continent looking to EU leaders to solve the contradictions in the UK’s own thinking for them, which is a bit unfair.

The UK should not try to pick off individual EU states by making them special offers, because that will anger other EU states. The governments of all the 27 remaining EU states have to bring their public opinions with them too

The UK needs an agreement that all the EU states and the elected European Parliament can live with.

Ultimately all EU states are bound by the Treaties, and are required by law to cooperate sincerely with one another to “attain the Union’s objectives”.

The European Court of Justice and the European Commission are obliged to follow the EU Treaties and ensure they are respected by the member states, the Council of Ministers and the European Commission.

The Commission represents the common EU interest, and is particularly attentive to the needs of smaller states. The UK should never give the impression that it would like to bypass the Commission, by going over the Commission’s head to Berlin or Paris.

While the European Council will authorize the negotiations with the UK, it is the Commission that will do the negotiation. The European Council can issue negotiating directives to the Commission, but the European Council acts by unanimity, which leaves a lot of discretion to the Commission.

So the UK needs to come up with a comprehensive proposal that is framed in the context of these Treaties and of the needs of each of the 27 (very different) EU states.

It should probably publish that proposal, in the form of a Green Paper, before triggering Article 50.

UK GOVERNMENT FIRST STEPS NOW

Now that the UK has voted to leave the EU, the first step has to be taken by the UK Government.

It must decide what sort of relationship it wants to have, trade wise, with the rest of the world.

At the moment, that is governed by agreements negotiated, for the UK, by the EU.

If the UK simply leaves the EU, all those agreements will  fall, as does UK membership of the World Trade Organisation(WTO). Agreements with dozens of non EU countries, will have to be negotiated again, at the same time as negotiating  with the EU. A lot of work.

Basically the UK government will have to choose choice between three options

  • Leave the EU and, like Norway, apply to join the European Economic Area (EEA),
  • Negotiate a new special trade agreement, like the agreement Canada or Switzerland has with the EU
  • Leave the EU without any trade agreement and apply, as a separate country, to join the WTO

The EEA option could be put in place quickly and would not disrupt trade all that much.

The EEA is a readymade model for external association by a non member with the EU. It could be taken down from the shelf, so to speak.  But, as an EEA member, the UK would still have to implement EU regulations and contribute to the EU budget. It would not allow curbs on EU immigration. The EEA option has been dismissed by “Leave“ campaigners, but it does involve leaving the EU, and  complies  with the literal terms of  the  referendum decision.

If the UK experiences severe balance of payments problems over the summer, the EEA option may become attractive. The UK already has a big balance of payments deficit anyway and capital inflows may be inhibited by the Leave vote. The EEA option would buy time, and would not preclude leaving altogether eventually.

The second option, a special trade deal, would be much more difficult.

It would require a detailed negotiation on every type of product or service sale between the UK and the 27 member countries of the EU, including across our border.

Such an agreement would take years to negotiate (probably 7 or 8 years), because it would be subject to domestic political constraints, and political blackmail attempts, in all EU countries, each of whom  would have to ratify it. If it proposed curbs on immigration from the EU, the EU countries affected  would make difficulties with other aspects of the deal, as a bargaining counter.

It is unlikely that a Trade Agreement would allow the UK to sell financial services into the EU. Indeed it would be in the interest of EU countries, that might hope to attract financial services, to make sure the UK got few concessions .

The third option…leaving the EU with no agreement… could come about, either because that was what the UK chose, or because the negotiations on a special trade deal broke down or were not ratified by one or two EU states.

It would require the application of the EU common external tariff to UK or Northern Irish products crossing the border into the Republic.

Average EU tariffs are around 4%, but on agricultural goods the mean tariff is 18%. The imposition of these tariffs is a key part of the Common Agricultural Policy, which protects the incomes of EU farmers. We would have no option but collect them at customs posts along our border. All forms of food manufacture and distribution within the two islands would be disrupted.

The disruption of the complex supply chain of the modern food industry would be dramatic and the knock on effects impossible to calculate.

A similar effect might be felt by the car parts industry, which is subject to tariffs, and is important to some parts of England.

Meanwhile the remaining 27 countries of the EU, and the EU institutions, will have a lot of thinking to do too.

They need to respond decisivly to the (false) claim that the EU is not democratic.

All EU legislation has to be passed by a democratically elected European Parliament, and also by a Council of Ministers who represent the democratically elected governments of the 28 EU countries.

The members of the European Commission must be approved by the democratically elected European Parliament.

But there is room to further  improve  EU democracy.

I  would make two suggestions ,

  • The President of the European Commission should be directly elected by the people of the EU in a two round election , at the same time as the European Parliament Elections every 5 years

2.)To create a closer link between National Parliaments and the EU, a minimum of nine national parliaments agreeing should be sufficient to require the Commission to put forward a proposal on a topic allowed by the EU Treaties . National Parliaments can already delay EU legislation, so they should be free to make positive proposals too.

That said, the EU should avoid over promising, and should not allow itself to be blamed for all the problems people face in their daily lives.

The EU is not an all powerful monolith that can solve the problems caused by technological change and globalisation. It is just a loose voluntary confederation of 28 countries, with no tax raising powers of its own. Nor is the EU responsible for debts mistakenly taken on by its members.

If the losers of globalisation and technological change are to be sheltered from misfortune, it is for the 27 states, not the EU itself, that has the taxing power to redistribute money from the winners from globalisation  to the losers.

The UK has not been particularly generous in this regard.  Its welfare system is modest, and its investment in productivity improvement has been poor.

In some respects, UK voters  have just mistakenly blamed  the EU. for the effects of the  omissions, and under performance, of successive UK governments.

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.

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 POLITICAL SITUATION IN IRELAND

Sin título-2
The new Dail is entering unknown territory. No party, or group of parties that is willing to coalesce, has a prospect of forming a majority government, or even of coming close to a majority. Minority governments existed before, but they were only a few seats short. Any minority government that might be formed now would be up to 20 votes or more short.

IS DAIL REFORM THE ANSWER?

In response to this, a case is being made for radically altered political practices in the Dail.

A loosening the whip system is envisaged by some. If this is confined to well defined conscience issues, this would be good, but if it is to be extended to economic and social policy, coherent government policy implementation would become exceptionally difficult.

If there is to be no government with a majority in the Dail, this will require a moving of power away from the government itself towards shifting majorities of groups of deputies in the Dail, who would decide, for themselves on a case by case basis, whether to pass, amend, or reject government legislation.

The government could make pacts, with particular parties or groups, to pass individual pieces of legislation, but, if the whip system had also been relaxed, these pacts might not hold. Devising a legislative programme would be very difficult. Nothing would be predictable on a day to day basis.

The loosening of the guillotine on debates has been suggested.

The present rigid arrangements for speaking in the Dail have removed spontaneity from ordinary Dail proceedings, and have meant that what we have in the Dail is so much debates, as a series of scripted recitations of pre set positions. So a change here would be welcome.

But some time limits have to be set, or legislation will never be passed!
Rather than remove the guillotine, it might be better to give the Ceann Comhairle some independent power to overrule the government and provide extra speaking time on a case by case basis for particular topics at his/her own initiative.

THE SCENARIO FOR A MINORITY GOVERNMENT

There would be shadow boxing all the time. Miscalculations would occur. Bluffs would be called. The result could be another election.

That scenario of a second election needs to be carefully analysed.

The parties would be faced,, in such a second election with exactly as they faced during the last election. They would face the same questions about who they would and would not refuse to coalesce with.

If they ruled out the same coalitions again, the election would probably resolve nothing.

But if they opened up new coalition possibilities during the second campaign, that they had refused before, voters would ask why they had to have a second election at all!

HOW LONG MIGHT A MINORITY GOVERNMENT SURVIVE? PASSING A BUDGET WILL BE THE KEY HURDLE.

Suppose, to avoid an election, we had a minority government. How long could a minority government survive?

The new EU mandated rules for budget preparation allow some leeway.

The new Government, if we have one, will be obliged to present proposals for the 2017 budget in October 2016.

When the 2016 budget proposals were presented in October 2015, I believe a defeat on one of the financial resolutions associated with it, would, at the time, have been treated as a confidence issue, requiring the resignation of the government. But this need not necessarily be the case this year because the actual budget for 2017 does not need to come into effect until 1 January 2017, almost three months after it will have been presented in October of this year.

The EU rules do, on the other hand, require that the budget be passed in final form by December.

Between October and December, the proposed budgets of each EU state are to be the subject of review by the EU authorities and by the other EU states. This is to ensure that the budget policies of all states are consistent and are not of a kind that might undermine the euro itself.

So, if other countries are to have a say on our budget between October and December, there is no reason why the parties in the Dail might not propose changes, so long as these are consistent with the overall budget arithmetic and with the Stability and Growth Pact, which the Irish people approved by referendum.

Thus a minority government could be simultaneously negotiating its budget, with BOTH the Dail, and its EU partners, over the two months from October to December.

The requirement on the opposition parties, if they object to a minority government’s October draft budget measures, to put forward alternative cuts or revenue raising proposals, could be challenging and uncomfortable for them. This process could educate the public about the choices to be made, and would severely limit the ability of parties outside the minority government to make unrealistic promises

But, once December arrived, there would be no more time for haggling and transferring money from one place to another to satisfy opposition parties. In December, there will have to be an up down vote on a final package. And if the government fails to win that vote, it would have to go.

I hear that the Fianna Fail Leader has been making suggestions that he might , from opposition, seek changes in the government’s budget, but still vote against the negotiated budget in the final vote. This suggestion is unrealistic because the only reason the government would have for accepting changes would be that to do so might enable the budget to pass.

The big problem with these imaginative scenarios is that we have no idea how they might work in practice.

Would opposition parties abandon the practice of a lifetime, and negotiate seriously with the government on alternative ways of cutting or taxing, to replace measures they have objected to?

Would the civil service be able to cost accurately the alternative proposals? This is not a trivial question. Unless one can rely on the figures, political agreement is impossible.

POLICY MAKING PARALYSIS LIKELY

Take the example of the health service, where it seems we are spending more to get less in return than most comparable EU countries. Although most government Departments have been able to produce reliable estimates, this has not worked in Health, where the cost of the service has been consistently underestimated. Would a government, that had to negotiate every change it wished to make, with an opposition which had no executive responsibility for anything, really be able to make coherent health reforms, that would give the people value for money?

In this scenario, the possibility of an early election would also have to be taken into account, and this would increase the risk of insincere or opportunistic negotiating tactics by both minority government and the majority opposition.

A minority government, in the present Dail, would lead to policy paralysis, and the reign of local and vested interests. It would not be a reasonable response to the recent electors wanted the government to do more, not less
There is also the possibility of unforeseen events.

An increase in international interest rates caused for example by the burning of sovereign bondholders in another jurisdiction cannot be ruled out. A vote for Brexit in the UK, or a failure of economic reforms in France could dent confidence in the euro. In such circumstances, a minority government could find itself in acute difficulty.

For all these reasons, every effort should be made by the parties in the Dail to negotiate the formation of a government with a majority.

CAMPAIGNING IN THE IRISH GENERAL ELECTION

Screen Shot 2016-02-20 at 20.31.20I have been doing quite a bit of door to door canvassing in the Irish General Election, mostly for my brother , Richard, in Dublin Bay North, but also for the 4 outgoing Fine Gael TDs in Meath, Damien English, Ray Butler, Regina Doherty and Helen Mc Entee.

Tonight I am speaking at a rally in Carrick on Shannon in support of Gerry Reynolds and his running mates, John Perry and Tony McLaughlin.

There is widespread committed support for all the five candidates I have canvassed for. They are well known for their consistent local work rate…..not just at election time.

There is also a high level of recognition of the fact that, in the past five years, 135,000 people have been added to the number at work, and that the growth rate of the Irish economy is now the highest in Europe. On the other hand, there is not enough recognition of the fact that keeping high economic and employment growth rates requires that we maintain competitiveness.

Some voters question whether the extra 135,000 jobs are well paid enough, and my answer is that many of them are well paid, and that the taxation contributed by all these extra workers is essential if there is to be an improvement in health and education services. Without that extra tax revenue, planned service improvements would be impossible.

Other voters complain that services in hospitals and schools are not good enough and mention particular cuts that have taken place. But these restrictions were the logical and necessary consequence of gradually getting the government’s budget back into some sort of balance. This was essential, if the country was not to follow the path of Greece.

Even as things stand, this year the government is still spending slightly MORE than it is collecting in taxes.

To reduce the debt to the sustainable level of 60% of GDP, we need to reach a point where revenue is growing faster than spending. Unless we do this, we are simply financing today’s services at the expense of tomorrow’s taxpayers.

A government that did that on an ongoing basis would eventually get into trouble.

WHY A MAJORITY GOVERNMENT IS NEEDED

The risk of political instability is not an abstract concept. If the government formed in the new Dail does not have a secure majority, that brings the possibility that annual budgets would not be passed, or could only be passed if all sorts of vested local interests, associated with “independent” TD’s, were bought off.

Lenders would worry about lending to a government that was in that situation.

Eventually that would lead to higher interest rates.

That would in turn feed through into mortgage and over draft rates, which are already too high for some borrowers.

Political instability, and uncertainty about budgetary policy of the Portuguese government, has already led to an 100 basis point increase in Portuguese bond rates.

Interest rates are currently being kept very low by the ECB……artificially so.

That policy is helping us, as a borrower nation, but it is also making it difficult for pension and insurance funds to invest profitably enough, to protect the interests of their policy holders and future pensioners.

We cannot count on that lax ECB policy lasting forever, so we should try to get our debts down to manageable levels, while the going is still good.

That is why it is right that the two government parties are emphasising fiscal prudence, and why a Dail full of independent TDs, pursuing sectional rather than national policies, could be a dangerous luxury for the country.

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