55/45

Our government has decided to support the Irish government and economy through a direct loan of over £7 billion as well as billions more through European Union support mechanisms.  It must be recognised that this decision is not an easy one, to characterise it as a black and white issue would be a mistake.

There is national interest at play.  An Irish economic and banking collapse would have consequences for the British economy with the resulting pain particularly acute for Northern Ireland as well as the need for a further bailout of some of our banks. 

However, it would be a misjudgement to represent the bail-out as an panacea for Ireland.  It will not prevent the Republic experiencing acute economic pain in the next few years.  Its aim is to prevent a collapse not spare the Irish from pain (nor prevent the knock-on effects of that pain to Northern Ireland).  The second problem is it may not work.  There is the potential to be throwing good money after bad.  The lack of any positive signs from the Greek bailout makes such concerns rational as do the economists' predictions (scroll down) that a number of countries will end up quitting the Eurozone even with bailouts.  The bailout may simply be buying time rather than solving the problems.

This leads us to the complicated factor in the decision, the Euro.  How much the Euro contributed to the Irish crisis will no doubt be debated for years to come but what cannot be disputed is that Ireland finds itself without a number of economic tools that a country with its own currency would have.  The problems within the Eurozone have pretty much validated the Thatcherite critique of the entire project but validation does not mean protection from the consequences. 

There is an attempt to defend what was done as for Northern Ireland.  However, this leads to something of a contradiction.  Previously we had been informed the cupboard was bare both in terms of cash and borrowing.  Action on either would not be in our national interest.  Now the Coalition government has managed to find both, cash for the EU and now loans for the Republic.  So concern for the banking sector seems to have been the motivating factor.

However, it was the Euro that negated the need for our participation in the bail-out.  The IMF are sufficiently concerned about the world economy and the EU from an economic (and equally political perspective to keep propping up the Euro) that whatever borrowing Ireland needed would have been forthcoming.  The absence of a £7bn loan from us would not have left Ireland wanting it would have beens ecured elsewhere.  It would have also kept us out of the potential morass of further bail-outs for other countries. Any promises that we won't should be treated with the sceptcisim any statement on Europe from this government deserves.  For me the 55/45 comes down on the side of No.

The die is cast on our particpation but if the government's concern for Northern Ireland is genuine there is a further step it must take.  The Coalition government is to produce a paper on the future of British banks, the over-reliance of Northern Ireland on Irish banks must be addressed in that paper.

Exception

While official denials continue to emanate from Dublin about a bailout for the Irish economy, the working assumption of everyone else appears to be that it will happen.  Professor Morgan Kelly provides an insight into why while a former IMF economist, Simon Johnston, advices them to do it now rather than later.

However, Coffee House blog reveals some of the possible detail of the bail-out.  The bail-out may not be restricted to the credit facility available to Eurozone countries but also involve access to the emergency funding mechanism that all EU members potentially contribute through.  This would involve a potential £6bn loan bill for the UK with it appearing the Treasury consider Ireland an exception to the previous rule:

"It's thought that any bailout to Ireland will be made from the European Financial Stability Facility Fund – a eurozone mechanism from which we're exempt – but there's also talk (£) of deploying the EU's emergency fund, which could make us liable for a loan of up to £6 billion. Whereas Treasury officials were keen to keep a solution to the Greek crisis within the eurozone, they are now telling the papers that, "This is not like Greece. [Ireland] are close trading partners."

It also sums up the difficulty of such decisions:

"It rather sums up the peculiar situation facing Europe, including the UK. Failure to act means that the contagion from Ireland could spread. But action carries with it clear costs, both fiscal and presentational. It's true to say that few domestic voters will relish the idea of propping up ailing economies elsewhere, particularly at a time of gruel and restraint at home. And what kind of precedent is being set should other countries, such as Portugal and Spain, go the way of Ireland themselves? A few years ago, the Celtic Tiger was a proud, growling beast. Now we must grapple with the consequences of its death."

Small Bites

The government will be able to transfer some powers from Britain to the EU without a referendum under new proposals, despite promising the public would get to vote on any such move.

The new EU Bill says a minister will be able to simply state the transfer of power is not significant enough to merit a referendum in some cases.

£450m pennies dropping?

Yesterday Melancthon over on the Centre Right section of Conservativehome admitted:

"...it appears that when Labour said our Eurosceptic promises were all hot air, they were right; that when Heseltine said that in government every Conservative Prime Minister is Europhile, he was right; that when UKIP said Conservatives were not to be trusted on Europe, they were right; that when I and others said that the Conservative Party had changed, and that Cameron and Hague were genuinely convicted Eurosceptics who understood what must be done and would not let us down, we were wrong."

This was before David Cameron tried to present an additional contribution of £450m to Europe as a victory on the basis they'd asked for twice that.  He'd previously called for a freeze but had quietly ditched that. 

UK fiscal policy is that the time for stimulus spending by government is over and that cuts are the policy for the next four years.  He has now agreed that the EU budget is an exception to that rule.  This retreat will also do little to curtail the European Commission plans for further growth in the budget during the next major funding round.

In an interesting coincidence this amount is about £50m more than was cut from the NI capital budget for the same period. This has been defended on the basis that there was no more money available and such cuts had to be made in the national interests etc.  Yet within 9 days of the Spending Review being released Cameron's decision has shown both statements to be false.

State of the Union

The latest state trapping the European Union has adopted is a State of the Union address by the Commission President with another being sought.  Such was the anticipation of the event that even among the europhilic parliament they attempted to bribe/fine MEPs into attendance before an outcry stopped them.  The backdrop to the speech wasn't good in terms of the wider public with the Eurobarometer showing widespread disillusionment with the European Union.  Also as someone who 'tries' to write speeches for others and with much still to learn of the art I do take an interest in such set piece events.

From Barroso's there is much to learn.  Namely how uninspiring a speech that tries to offer a little bit of everything to everyone but that ultimately amount to superficial change can be.  There will be more of the same and at increased cost.  When faced with public opposition politicians either have to change direction or challenge public opinion by making the case based on the fundamentals.  This does neither.

In theory this should be the perfect time to use our purported referedum lock to challenge the operation and direction of the European Union with some sympathy from the electorates on the continent but the lock appears still looks more myth than reality.

Insanity, who decides?

Dan Hannan uses a Rod Liddle post to challenge the group-think in the BBC.

"...the sweet breeze of Euro realism..."

...is how one Labour MP described the Conservatives rolling over and supporting the motion in Parliament yesterday to establish the European External Action Service.  Dan Hannan helps explain the significance of the EEAS here.

In the 2009 Conservative European Election manifesto (pdf file), David Cameron pledged:

"....if the Constitution is already in force by then, we have made clear that in our view political integration in the EU would have gone too far, the Treaty would lack democratic legitimacy, and we would not let matters rest there...Brussels believes that the default answer to every new issue – from foreign policy challenges to fighting terrorism, from globalisation to regulating financial markets – is to demand more powers from Member States. Labour – first under Tony Blair, now under Gordon Brown – has willingly agreed to such demands.  We fundamentally disagree with this approach.  The answer to the challenges Europe faces is not greater centralisation of power in Brussels...Conservatives are committed to bringing change to Europe."

Apparently not letting matters rest didn't mean trying to stop it or reverse it rather it means implementing it, fundamental disagreement means acquiescence and the change to be brought was more Euro-centralism.  Laughingly, it appears some new jargon has been created for Tories with their retreat described as a policy of Euro-Constructionism.

According to ConservativeHome the role of Tory MEPs was key in the decision being pushed through.  These are the people who claimed to be:

"...unstinting in their pursuit of our national interest..."

Returning them to Brussels was vital:

"...to make sure the other political parties are not able to sell Britain short."

So that they could fulfil the aim of:

"Maintain the UK’s independence on foreign affairs"

According to the Daily Telegraph the MEPs somersault came following orders from William Hague who had backed down in the face of EU demands.  This left Charles Tannock MEP, the ECR's Foreign Affairs spokesman, having to issue an explanation with an internal contradiction: 

"We were opposed to the creation of the EEAS but we are now reconciled to engaging constructively within the new architecture in the best interests of our countries."

Locally, the UUP leader Reg Empey signed the same pledge as Cameron in the UCUNF manifesto for the 2009 Euro election and Jim Nicholson made the same promises on British interests and policy aims.  However, Jim Nicholson's name does not appear among the Tory MEP's who voted against or abstained on the motion in the ECR group.