Back in 2011, the chief economist at Toscafund, a rambunctiously Eurosceptical outfit which manages assets worth $3 billion, wrote to the Financial Times with a playful suggestion: Ireland should solve its problems by abandoning the euro for sterling and inviting other countries to do the same. More recently, the London-based fund grabbed some attention in Dublin by saying that after Brexit, it would behove Ireland to follow suit. Its case, in part, was that when countries are symbiotically linked, being on opposite sides of any important economic arrangement damages both.
Most economists who study Ireland find those conclusions wacky, but they recognise one grain of truth in the fund’s thinking. Turn Tosca’s point around, and there is a positive assertion that most honest observers would agree with: since 1973, being inside the European club together has been a boon to both countries, transforming sulky co-dependence into a dynamic partnership.
In the early 1970s, Ireland was a traditional, authoritarian, agrarian society, yoked to Britain financially (it couldn’t have joined the EEC alone) but resentful of its ex-overlord. If the two states met in Europe, they did so unhappily: Ireland was taking Britain to the European Court of Human Rights for maltreating detainees in Belfast. Since then, Ireland has been transformed, socially and technologically, and Britain has benefited from that. The two countries have worked together in Brussels to promote the single market, a light regulatory touch and open trade relations between the EU and the world. Where they differed (over farm aid), generally warm relations overcame antagonism.
Commercially and culturally, Ireland has made an international mark, both in Europe and further afield, without forfeiting ties with Britain. Britain, for its part, has gained a far more interesting partner. If people cross the Irish Sea (in either direction) to work, they are now more likely to be software engineers than unskilled labourers. Above all, London and Dublin have collaborated closely, with European help, to stabilise a conflict in Ulster which was tragic in itself and gravely harmful to both states.
So what would happen if Brexit were to end this happy symbiosis? Irish economists see a clear danger that an act of self-harm by Britain would have knock-on consequences for their own island. A report by Ireland’s Economic and Social Research Institute suggests that for every 1% decline in Britain’s GDP, Ireland will see a drop of 0.3%. And as a recent report by Davy, a Dublin stockbroker, notes, most estimates suggest that new trade barriers “could reduce the UK GDP by 1-3% in the long run”. It’s a sign of Hibernian maturity that observers in Dublin worry more about Britain damaging itself than about actions directly inimical to Ireland. But those will occur; their extent will depend on what trade deal a post-Brexit UK can clinch with its ex-partners.
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Ireland’s economic relationship with Britain remains important, even though its reliance on the UK has diminished. Britain takes about 14% of Ireland’s exports (down from 50% in the 1970s) and supplies about 27% of Ireland’s imports. But the two are bound more tightly if you focus on the agri-food sector (50% of Irish farm exports go to Britain, while Irish food-makers rely heavily on British inputs) and if you exclude foreign investors using Ireland as a way-station. Some 44% of exports from Ireland’s “indigenous” firms go to Britain. If, as is entirely possible, Britain fails to get a favourable trade deal and its exchanges with Europe revert to WTO rules, trade between Britain and Ireland would be badly disrupted. However little either side wanted this, there would also be impediments to sales across the inter-Irish border, which have burgeoned in recent years. Ulster’s fragile economy could be massively destabilised as a result.
Does any of this support Tosca’s argument, that Ireland might be forced by pragmatic considerations to follow Britain out of Europe? Certainly not, says Dan O’Brien of the Institute of International and European Affairs, a Dublin think-tank. “Ireland has done brilliantly at attracting foreign investors, and they aren’t coming for Irish or British markets, they want access to Europe.” Most observers of Ireland would concur, even those on the left who are leery of being too generous to investors; they want to pursue their vision in a European arena, not on a self-isolated island or islands.
And whatever utility dictates, it would be politically impossible for any Irish government, even the relative Anglophiles of the ruling Fine Gael party, to persuade the nation to choose Britain over Europe. Remember, Ireland has just re-enacted the moment 100 years ago when rebels in Dublin defied the Crown, praising “gallant allies” including the German Kaiser. Using Europe as a counter-weight to British oppression is still part of the Irish memory; it has been half-excised but cannot be completely rooted out.
So Ireland will simply absorb the pain caused by Brexit, both to itself and to its neighbour and to their relationship. It fears the pain will be considerable.
This article is being published simultaneously on The Telegraph website
Edited by Alan Wheatley
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