IT IS OFTEN easy to forget just how integral our membership of the euro currency union has been to Ireland’s miseries in recent times. The super-low interest rates of the early 2000s were completely wrong for Ireland’s economy at the time, but just what Germany needed to keep herself going as the (then) ‘sick man of Europe’. These interest rates spurred on an overheating economy until it exploded.
When the crisis hit and our tax take tanked, the easier routes that many countries take to clawing their way back to economic growth were immediately off the table. We could not devalue the currency, as is a standard tool in the box of most nations. Devaluation would have made exports cheaper to foreign nations, prompting them to buy more from us and create jobs and bring money in. We would have suffered at the petrol pumps and for other imported goods, but it would, arguably, have been an awful lot easier than the ‘internal devaluation’ we have gone through. Job losses and falling wages was our sole route to regaining economic competitiveness.
Our membership of the eurozone also took away options we might have had around restructuring our debt or using the Central Bank to print money, as the UK and the US have so famously done. Both countries are in rude economic health compared to the eurozone.
An actively hostile Central Bank
Instead of having a Central Bank playing on our side for the Irish national interest, we had an actively hostile one that worked hard to force us into a bailout we could not avoid because the policy tools required were not available.
Even though the Troika has formally left Ireland, there are heretofore insulting rules attached to our membership of the euro that will continue forevermore. Each year our budget will have to be submitted to eurocrats for approval and we have to stick within strict deficit rules and get our national debt down over a prescribed period of time. Any wobbling will be met, perhaps counterintuitively, with fines up to 0.2% of GDP. If we had failed to meet the target last year, the fine would have been €350 million taken from Irish taxpayers.
If there is one thing Ireland and its people cannot be accused of these days, however, it is breaking the rules. We have kept assiduously to the programme laid down by the Troika and now enforced in perpetuity by the European Commission. We will, right on time, come in under our 3% of GDP deficit target next year. We have done so well that we have room to wiggle and begin to cut taxes while we’re at it. Contrast this with a wider eurozone that is tottering near a dangerous economic abyss of low growth, steadily high unemployment and very likely a slide into deflation next year.
What about France?
The eurozone is a sick place, filled with ailing economies that are unable to meet the requirements of membership. Consider France: the country is theoretically bound by the same rules as we are regarding debt ratios. It submitted a plan promising that it would bring its annual deficit below 3% in 2013. This year, France will run a deficit of 4.4%. It promised the European Commission that it would get it right by next year, 2015. Now we are told, France will achieve a deficit of 4.1% instead.
The French have not reacted well to the suggestion that some “parking ticket wardens” in Europe, as their finance minister termed the Commissioners looking at the matter, should threaten fines for non-compliance.
In case you are in any doubt about whether or not Michael Noonan should wheel that line out should he ever decide to park an Irish budget on the double yellow lines in Brussels, the French prime minister Manuel Valls has insisted that “France must be respected, it is a big country.”
Ireland, alas, is a small country. We may be almost unique among these ossified and creaking old powers in that we actually have the capacity for sustained economic growth, but to them we are an agricultural backwater who must do as it is told.
This adds ultimate insult to the very real injury inflicted on Ireland in return for the privilege of sharing a currency with such as Le Grande France. There will be no devaluations, no quantitive easing, no debt restructuring or shirking the rules for Ireland. We must go to the poor house and earn our thin measure of gruel to survive. It is for our own good. But non, non, non, it is different for the grand, powerful and important nations such as France. One could not possibly trifle the persistently layabout French, who are without a balanced budget since 1974 and possess a propensity to strike at the merest suggestion of living within their national means.
The European Commission that so rigidly tells the Irish how to run their affairs will cut France another deal this year, to extend and pretend that they will hit their targets by 2017 instead. From their original promise in 2013, this is about the length of time the Troika gave Ireland to cut a deficit of 11.7% to 3%. Given the French track record in the area, it is difficult to see them meeting even this 4.2% cent to 3% drop in the coming years.
The Irish have stepped up
We perhaps questioned if the harshness of the past few years in Ireland wasn’t deserved for the profligacy and mismanagement of the boom. The crash was the result of reckless economic management, but the severity of its impact on people was related to our inability to take measures normally open to independent nations. We are perhaps different to many of our continental peers in that the Irish have stepped up and taken responsibility for ourselves. If our national finances are unaffordable, we work to fix them; unlike the French, Italians or Greeks who have run debts up for so long that they barely understand the concept of financial probity that every Irish household has learned so well in the past half decade.
Going forward we can now clearly see that eurocrats will be involved in the running of our national life, while rank hypocrisy will reign when it comes to dealing with other countries like France and the perennial basket case Greece, which continues to fail to meet targets set down in front of it.
A free trade zone with European countries makes a lot of sense. But really, Ireland would be better off sticking to the model of some of our savvier cousins in the European Union who have stayed out of this basket case currency union.
Assuming we’re in too deep now to pull out, Ireland should use its clout as an EU member with veto powers to pressure that either countries like France play by the same rules, or those rules are relaxed to keep Eurocrats out of our affairs. The French are telling us quite clearly that we are not, in fact, all in this together. If so, fine – go to hell with your rules.
Of course, given the perilous state of the eurozone economy the whole thing will probably just collapse itself in time. Quel dommage.
Aaron McKenna is a businessman and a columnist for TheJournal.ie. He is also involved in activism in his local area. You can find out more at aaronmckenna.com or follow him on Twitter @aaronmckenna. To read more columns by Aaron click here.
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