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£7bn, 1 Province and 13 Miles of Sea

In Europe, Events, Foreign Affairs on December 6, 2010 at 7:46 pm

By polarii for The Daily Soapbox

George Osborne has made the incredible announcement that he will provide a £7bn direct loan to the Irish Republic, to support its struggling economy. Incredible because it belies a surprisingly good relationship between the Kingdom and Republic. Which we might not have assumed given the history between the two countries. That Osborne has chosen to do this by means of a direct loan rather than through the EU, or the IMF is explicit and public affirmation of this close relationship. However, there is a fair degree of self-interest at work as well.

The primary cause of concern is that Britain’s banks are now exposed to the tune of £50bn in the event of the Irish economy collapsing. Obviously, this would be a near-fatal blow for the economic recovery we are now beginning to see, but, on a more immediate level, the government is guaranteeing a sum of the deposits in British banks, some of which rest upon the debt held by Irish banks. When we consider that a collapse in the Irish economy may well lead to a crisis of confidence in the Spanish economy, where Santander is based, the ramifications of not supporting Ireland are actually quite staggering for the British economy.

In another area, the Northern Ireland economy has been hit particularly hard by the recession, and, of all regions in the UK, unemployment runs highest here. The collapse of the Irish economy would hit this area particularly hard, as it is estimated that 40% of NI exports work their way into the Republic. This is also true of most of Britain’s agricultural output; but the situation is at its most accute in Northern Ireland. The relative stability in recent times in Northern Ireland is, in part, due to an period of economic prosperity, which could well be undermined by spending cuts, and would certainly be undermined if the Republic also collapsed as an export market. To see this loan as a massive bung to Northern Ireland may be a slightly cynical viewpoint, but it goes some way towards justifying George Osborne’s decision.

Perhaps there is further political machination going on here: if the UK supports the Eurozone, though not a member, it gives further bargaining power to Cameron around any future European table; it also allows him to say to Europhiliacs that he is supportive of the European ideal, in general terms. The Euroskeptics in the Conservative party have turned round and asked whether this is prudent; Cameron can justify it amply on grounds of national self-interest too.

The one objection is that £7bn is more or less the figure that will be saved by public spending cuts this year. The British public, who may not fully grasp the potential problems that beset Northern Ireland, the Eurozone, or the banks, may, understandably, feel a bit peeved. But, as we have seen, the loan is firmly in Britain’s interest, and moreover, unlike loans to mega-banks, we actually have a legal and diplomatic apparatus to eventually get it back – the Irish Republic can’t move its accounts offshore. Plus Ireland’s credit ratings will be absolutely shot if they refuse to pay it back. Though it would ultimately be financed by yet more borrowing, it would be a really stable and sensible investment rather than an injection into the less certain realm of public service; at any rate, saying we can borrow more so we should spend it on services is exactly what got us into this mess in the first place. This money is being spent on keeping us out of another one.

And here’s where we can take the discussion in all sorts of interesting directions. We could discuss whether the Euro has helped or hindered Ireland. We could discuss whether the free market or state ownership should be the answer to the underlying problem. We could also discuss if there is an underlying ironic narrative that Ireland is being bailed out by an Ascendancy aristocrat, the likes of whom it was so eager to get rid of.

But I want to take it in an historical direction. For at least 800 years, the English have been interfering in Ireland. By the early 1800s, Britain and Ireland unified into one state. About 100 years later, most of the groundwork was in place for the two countries to split. During WW2, Ireland did not join Britain against the Nazis, not because it was secretly fascist, but because it did not want to be seen on the same side as the English. Hostility continued right up into the 1980s and 1990s, until the Northern Ireland problem became so serious that Major had to involve the Republic in sorting it out. Since the Good Friday agreement, The Kingdom and the Republic have been not merely on speaking terms, but positively friendly – quite probably the best ever sate of Anglo-Irish relations. Hence the loan.

But the loan, for me, begs a much broader historical question. To what extent is Ireland viable without being intimately intertwined with the UK? At which point does Ireland become so intertwined that we’ll have to unite again? And is it better for Ireland to be united with the UK anyway? Of course, popular opinion in Ireland would probably not stomach such a union, but, when the UK decides to throw Ireland £7bn, when their economies are so inter-related,  with so much culture and history being shared, a union between these two seems a much more reasonable prospect than a united Europe. And perhaps here is the broader comment on the European project: if countries who share a land border, around 30% of trade, a language and much of their history can club together in times of need, then there is hope for Europe. But if 13 miles of sea and 1 province is a big enough gap to make union seem absolutely impossible, even when it seems really very logical and sensible that  the countries should join, then Europe should simply stick to a loose alliance, and not hope for anything greater.

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