Britain Gives into European Demands on Northern Irish Border

Theresa May Jean-Claude Juncker
British prime minister Theresa May and European Commission president Jean-Claude Juncker pose for photos in Brussels, December 4 (European Commission)

As I predicted it would, Britain has given into European demand on the Northern Irish border in order to secure an exit deal on Friday that paves the way for talks about the kingdom’s post-Brexit trade relations with the EU.

In the absence of an innovative solution, Britain is now committed to maintain “full alignment with those rules of the internal market and the customs union which, now or in the future, support north-south cooperation, the all-island economy and the protection of the 1998 Agreement” that brought peace to Northern Ireland.

The text also specifically bars the United Kingdom from imposing “new regulatory barriers” that could put the 1998 Good Friday Agreement at risk. Read more “Britain Gives into European Demands on Northern Irish Border”

Irish, Northern Irish Leaders Make Contradictory Brexit Demands

Leaders from Ireland and Northern Ireland have made contradictory demands that threaten to hold up the Brexit negotiations.

  • Leo Varadkar, the prime minister of Ireland, has threatened to veto progress in the talks unless a hard border with Northern Ireland is ruled out.
  • Arlene Foster, the leader of the Democratic Unionist Party (DUP) of Northern Ireland, whose support Theresa May’s Conservatives need for their majority in Westminster, has said she will accept neither a barrier between the province and the rest of the United Kingdom nor an agreement that would force Northern Ireland to mirror EU regulations.

They can’t both have their way. Read more “Irish, Northern Irish Leaders Make Contradictory Brexit Demands”

British Reject Plan to Keep Northern Ireland in Customs Union, Single Market

Belfast Northern Ireland
Aerial view of Belfast, Northern Ireland (iStock/Mlenny)

Britain is fighting an EU proposal to keep Northern Ireland in the bloc’s customs union and single market in order to avoid closing the border with the rest of the island.

“We will leave the EU in 2019 as one United Kingdom,” James Brokenshire, Theresa May’s Northern Ireland secretary, has said.

He argued on Monday it would be “impossible” for the province to remain half in EU when the rest of the country exits. Read more “British Reject Plan to Keep Northern Ireland in Customs Union, Single Market”

As Britain Prepares to Leave EU, Irish Eye Unification

Irish prime minister Enda Kenny has for the first time raised the option of unification with Northern Ireland, saying, “The discussion and negotiations that take place over the next period should take into account the possibility.”

Kenny’s liberal Fine Gael party hasn’t historically advocated the incorporation of British Northern Ireland into the Irish republic, but the European Union referendum last month has made the situation more fluid.

Northern Ireland, like Gibraltar and Scotland, voted largely to stay in the EU while majorities in England and Wales opted to leave. Read more “As Britain Prepares to Leave EU, Irish Eye Unification”

Irish Defeat Government’s Proposal to Abolish Senate

Ireland went to the polls on Friday to determine two major issues: whether a new Court of Appeals was needed for the country and whether its higher house of parliament, Seanad Éireann, should be abolished.

In terms of media coverage and public interest, the latter garnered far more attention. Prime Minister Enda Kenny’s government was in favor of both referenda passing in accordance to 2010 election manifesto. Yet the Senate vote was defeated by about 32,500 votes or 51.7 to 48.3 percent. This has been seen as a blow to the ruling Fine Gael party which also had to deal with major economic reforms and a debate over abortion laws in the last year. Moves are now being proposed to adjust the body from its current form which is considered outdated and elitist as senators are elected by a paltry 3 percent of the electorate through a series of ballots from senior figures in society and university graduates. Read more “Irish Defeat Government’s Proposal to Abolish Senate”

Irish, Portuguese Toughen It Out While Greeks Rage

When Greeks head to the polls on Sunday for the second time in two months to elect a new parliament, they are likely to return a radical leftist party to government that has promised to tear up the conditions of the European country’s two international bailouts and give up on austerity. With it, Greece could give up on the euro as it could soon lack the funds necessary to avert a sovereign default.

Meanwhile, in Ireland and Portugal, two other countries that have received financial assistance from their European peers when they teetered on the brink of bankruptcy, a majority of voters seems willing to accept the austerity measures that were implemented to balance public spending even if they may have deepened the recession in the short term. Read more “Irish, Portuguese Toughen It Out While Greeks Rage”

Ireland’s Left Benefits from Growing Austerity Fatigue

Sinn Féin‘s campaign to reject the European Union’s new fiscal treaty appears set to fail but it has managed to boost support for the left-wing party which is emerging as Ireland’s main opposition platform to austerity.

Currently the fourth largest faction in parliament, behind the ruling center-right Fine Gael and Labor Party as well as centrist republicans, Sinn Féin has become the second largest party in opinion polls largely thanks to its campaign against what it calls Europe’s “austerity treaty.”

The Irish head to the polls on Thursday to vote in a referendum on the fiscal treaty that was signed by European leaders in March. The accord requires member states to write a balanced budget requirement into their national laws and introduces a financial penalty of up to .1 percent of gross domestic product for countries that violate the debt and deficit rules.

Surveys suggest that up to 40 percent of Irish voters are in favor of the treaty with 36 opposed and 24 percent undecided.

Sinn Féin, led by Gerry Adams, is the only major Irish political party that has rejected the fiscal treaty. It also campaign against the austerity measures that were imposed on Ireland in exchange for international financial support.

Ireland had to tap into Europe’s temporary rescue mechanism for a €85 billion bailout in 2010. Through public spending cuts, pay freezes for government workers and an income tax hike, the Irish government hopes to bring its deficit under 3 percent of GDP in 2015.

The policies have been painful. The Irish today consume 12 percent less than they did before the bank crisis. Even so, the national debt is expected to peak at 120 percent of GDP next year.

As fears mount that Greece could leave the eurozone unless the parliamentary elections next month return a government that honors the conditions of the country’s bailout agreements, Ireland’ borrowing costs are rising, raising the possibility of deeper cuts.

Labor has suffered the most from the austerity measures in terms of popularity. The Social Democrats’ support has halved to 10 percent since last year’s election. Sinn Féin appeals to traditional Labor Party constituencies with its anti-austerity rhetoric and now gets 24 percent support in the polls. Prime Minister Enda Kenny Fine Gael has remained stable.

The government has pledged to maintain the corporate tax rate at 12.5 percent, the lowest in the eurozone, which has helped to lure companies as Google, Intel, Microsoft and Pfizer to set up operations in the country.

Investment from multinationals, whose employees account for almost 10 percent of Ireland’s workforce, should enable the Irish economy to grow modestly this year and add jobs.

Sinn Féin is the former political wing of the Irish Republican Army which for decades waged a violent campaign against the British to reunite both parts of Ireland. It played a key role in the Good Friday peace accords that were brokered with American mediation fourteen years ago. Sinn Féin is now the second largest party in the Northern Ireland Assembly and in coalition there with the Protestant Unionists.

Ireland, Spain Cast Doubt on Europe’s Austerity Pact

When Europe’s leaders committed themselves to stricter budget discipline in December, it was hailed as a victory for prudent Germany which had insisted that the only long-term solution for the continent’s debt woes was fiscal consolidation. Three members of the currency union could yet challenge that proposition.

Irish voters will have their say on the fiscal treaty in May or June. Where their government, composed of conservatives and Social Democrats, supports the treaty and likes to portray the referendum as a vote for or against Europe, the left-wing opposition has dubbed the fiscal compact an “austerity treaty” and will seek to rally nationalist sentiment against what it perceives as Germany dictating fiscal policy to the rest of the eurozone.

The threat of an Irish “no” previously necessitated the rewriting of a European constitution treaty in 2005 after Dutch and French voters rejected the charter in referendums. The Irish voted against the revised Lisbon Treaty in 2008 but voted for it in a second referendum a year later. Read more “Ireland, Spain Cast Doubt on Europe’s Austerity Pact”

Ireland Taxing Private Retirement Savings

Ireland is one of several European nations that has begun seizing private retirement savings to mend its budget deficit. For all the talk of “austerity,” this is one of the most blatantly socialistic measures enacted in Ireland today — it is immoral and could make the nation’s fiscal problems worse.

Under the Irish plan, a “temporary” 0.6 percent tax will be levied against private pensions to fund a stimulus package. The government promises that it won’t be around for more than four years but as Sam Bowman of Britain’s libertarian Adam Smith Institute points out, “temporary taxes have habit of sticking around and growing.”

Even if the tax is tiny, it has broken the good faith in which Irish pension holders invested their money, according to Bowman, and undermining their ability to provide for themselves in their old age — “yet another step away from self-sufficiency toward dependence on the state.”

Unless Ireland indeed repeals the measure soon and makes clear that it won’t ever be repeated, the country risks getting caught up in a deadly cycle of government interventionism that Ludwig von Mises warned against in “Deception of Government Intervention,” Christian Economics (February 4, 1964). If the Irish don’t believe that their savings are secure, why would they save for retirement at all? The state is then compelled to provide more generous public pension provisions, for which it has to tax more, which makes people even less self reliant.

“In this way,” wrote Von Mises, “the government is forced to add to its first intervention more and more decrees of interference until it has actually eliminated any influence of the market factors — entrepreneurs, capitalists and employees as well as consumers — upon the determination of the ways of production and consumption.” That would be a sad fate for Ireland which currently ranks among the economically freest nations in the world.

Eurozone Leaders Enact New Financial Pact

Eurozone leaders agreed Friday night on a program of long-term economic reform for the single currency zone. Their immediate focus was on the future of the bailout mechanism put in place after the crisis in Greece last year. Greece’s and Spain’s credit ratings were once again downgraded earlier in the week, urging the leaders of the monetary union to calm markets.

The heads of government agreed to reform the scope and increase the size of Europe’s existing rescue fund. The European Financial Stability Facility had some €440 billion at its disposal to aid governments that were unable to borrow on financial markets at an affordable rate. Ireland had to tap into the facility last November. Portugal may have to request a bailout this year.

Europe had been divided on the future of the bailout fund with Germany in particular pushing for a more comprehensive overhaul of economic governance throughout the eurozone.

The leaders agreed over the weekend to expand the bailout fund to a total of €500 billion and set up a separate, permanent facility of the same size in 2013 when the temporary fund expires. The current as well as future fund will be able to purchase bonds directly from eurozone countries and itself be financed by at least some capital contributions from member states instead of the current system of guarantees.

Along with French president Nicolas Sarkozy, Chancellor Angela Merkel previously proposed a pact to boost Europe’s competitiveness, including raising the retirement age across the eurozone, abolishing the indexation of wages to inflation, harmonizing corporate tax rates and instituting a “debt brake” that would limit the ability of national governments to plunge deep in the red.

At the previous meeting of government leaders last month, it became evident that Europe didn’t want Germany’s rules. The leaders agreed to a watered down version of the competitiveness pact over the weekend which proclaimed that the policy mix “remains the responsibility of each country.”

Under the new regime, the European Commission would supervise fiscal commitments that are national prerogatives. The existing Stability and Growth Pact sets a deficit limit of 3 percent of GDP and a debt limit of 60 percent of GDP. At times of crisis however many the nations that carry the euro have broken those rules.

Southern eurozone economies, which are among the bloc’s most heavily indebted, were wary of stricter budget rules as well as labor market and welfare reforms. Belgium, Portugal, Luxembourg and Spain objected to the wage indexation proposal while Austria criticized plans to raise the pension age across the continent.

Ireland, which sought better terms on the €67.5 billion bailout it received last year, was rebuffed when it refused to contemplate raising its corporate tax rate. Because of its low tax regime, Ireland has attracted foreign companies and investment, especially from the United States.

“It’s difficult to ask others to help finance a plan but not concern themselves with the tax side,” President Sarkozy told reporters after the summit. Heated debates between Ireland’s newly-elected prime minister and the French president reportedly caused the negotiations to drag on until the early morning hours.

The council did agree to cut the interest rate Greece pays on its bailout by a single percentage point. Athens had asked for two.

The new “pact for the euro” further separates those EU countries that are in the single currency club from those that aren’t. Poland in particular had been anxious about the Franco-German “competitiveness” effort. “Are we getting in your way?” Prime Minister Donald Tusk wondered. “You are humiliating us.”

Denmark and Sweden also feared isolation. Unlike Poland, they have no interest in joining the euro. Smaller economies as Estonia, Slovenia and Slovakia would now appear to have more influence on policy than longtime EU member states — including the United Kingdom.

In the long run, the euro pact might actually lead to more instead of less disunion among the European states. Countries as Poland may voluntarily join the pact to preserve the single market but it seems unlikely that Britain or Sweden would.