Irland
The National Platform - The Economist Background - Nice
The collapse of the housing bubble in the United States is mutating into a global phenomenon,
with real estate prices swooning from the Irish countryside and the Spanish coast to Baltic seaports
New York Times 14/4 2008
In Ireland, Spain, Britain and elsewhere, housing markets that soared over the last decade are falling back to earth. Property analysts predict that some countries, like this one /Ireland), will face an even more wrenching adjustment than that of the United States, including the possibility that the downturn could become a wholesale collapse.
For countries like Ireland, where prices were even more inflated than in the United States, it has been a painful education
Emma Linnane, a 31-year-old university administrator.
She bought a cozy, one-bedroom apartment in the Dublin suburbs with her fiancé, Paul Colgan, in May 2006, at the peak of the market.
They paid $575,000 — at least $100,000 more than it would fetch today.
De fyra största svenska bankerna har idag mer än hälften av sina sammanlagda tillgångar i utlandet,
framför allt i övriga Norden, men även i Tyskland, Polen och de baltiska länderna.
Nästan lika stor andel av deras sammanlagda rörelseresultat härstammar från utlandet.
Riksbankschef Stefan Ingves, Nationalekonomiska föreningen, 2008-03-13
Though many observers are rightly concerned about Spain, it may be Ireland that becomes the next serious test of EMU’s one-size-fits-all monetary policy.
Alan Ahearne, Eurointelligence 6/4 2008
Iin the process leading to EMU real interest rates sharply fell in countries such as Spain, Portugal, Ireland and the Netherlands.
This reduction in real interest rates led to an economic boom and overheating that – in the countries above – took also the form of a housing boom with excessive investment in real estate and sharply rising home prices.
The ensuing economic bust in the Netherlands and Portugal was particularly painful.
Nouriel Roubini, New York University and RGE Monitor, 28/6 2007
"The Irish are heavily dependent on exports of tech-goods to the US, so they're hit hard by the rising euro,"
said Bernard Connolly, chief strategist at Banque AIG.
Daily Telegraph 25/4 2007
The ECB has raised rates seven times to 3.75pc already, with vastly different effects on a 13-nation currency union. While the German bloc prospers, the 'Club Med' stragglers are at the tail-end of a property boom. Reverting to their old habits, they have lost competitiveness.
The Irish Tiger has been a star performer over the past decade but EMU membership has distorted the economy and caused a property bubble. Personal debt per capita has reached 190pc of GDP, the highest in the developed world. Bank lending grew at 30pc last year. House prices have risen at 16pc a year for the past decade.
Ireland may soon face the sort of problems encountered by Britain during the ERM crisis the 1992, when the fixed exchange rate system forced the UK to raise rates during an accelerating downturn. The big difference is that Ireland will have no way out.
There are two phases in an asset price bubble that repeat themselves with clockwork regularity.
In Ireland, the GDP share of construction and housing is 20.7 per cent.
Wolfgang Munchau, FT
Do current account deficits matter inside a monetary union?
he impact of low interest rates was greatest not where demand was weakest, but where conditions for a property boom were best: notably, in Ireland and Spain
Martin Wolf, FT 28/3 2007
The booms in Spanish and Irish real estate make the US real estate boom look timid
Charles Gottlieb of the Center for European policy studies, Nov 21, 2006
Ireland today is the richest country in the European Union after Luxembourg.
Thomas L. Friedman, The New York Times, 29/6 2005
Yes, the country that for hundreds of years was best known for emigration, tragic poets, famines, civil wars and leprechauns today has a per capita G.D.P. higher than that of Germany, France and Britain.
It tells you a lot about Europe today: all the innovation is happening on the periphery by those countries embracing globalization in their own ways - Ireland, Britain, Scandinavia and Eastern Europe - while those following the French-German social model are suffering high unemployment and low growth.
Irlands rekordhöga tillväxt är ett minne
blott
BNP växte bara med 0,5 procent i årstakt under
första kvartalet i år
Dagens Industri,
Gunnar Örn, 7/8 2003
IMF warns house prices may have risen too
high
Irish
Times 7/8 2003
There is a significant risk that house prices are overvalued, leaving the property market vulnerable if unemployment rises sharply, the International Monetary Fund (IMF) has warned. The boom in credit could have helped to push house prices to unsustainable levels, it says, leaving purchasers exposed and posing risks for banks and building societies which have lent them money.
In its latest assessment of the Irish economy, the IMF forecasts a pick-up in growth next year, but warns that declining competitiveness could hinder the economy.
Att döma av de irländska erfarenheterna spelar det
alltså ingen roll om Sverige röstar ja eller nej till EMU i
september. Handeln med euroländerna lär varken bli större eller
mindre för det.
Gunnar Örn, DI 7/4
2003
Irish urged to support enlargement after No vote
The European Union is set to ask the Irish parliament (Dáil) for a declaration backing enlargement if Ireland rejects the Nice Treaty for a second time, reports the Irish Times.
In this way EU officials are hoping to get around the fact that enlargement will proceed anyway despite the fact that the Irish would have voted against a treaty which facilitates it. However, they admit, according to the Irish Times, that such a declaration would not remove all the obstacles that will envitably follow in the path of a second rejection of Nice.
Irish citizens are due to go to the polls next Saturday, October 19.... more
The Irish should be nasty to Nice
By
Quentin Peel, Financial Times, October 1 2002 20:01
Irish referendum Saturday, October 19
The Irish prime minister, Bertie Ahern, this afternoon announced
that he has set the date for the second referendum on the Nice Treaty. It will
take place on Saturday, October 19.
Mr Ahern said that it would be a
disaster for both Ireland and the applicant countries if it were to be
rejected.
Ireland's once so successful "Celtic Tiger"
economy has been hit by negative economic developments recently, which might
undermine the government at a very critical time, analysts in Dublin fear just
around a month ahead of the planned second referendum on the Nice Treaty.
Without the approval of the Irish, the Nice Treaty will not be passed in
the whole of the EU....
more
Dublin to present referendum bill next week
Föredrag av Johan Norberg vid Näringslivets Fonds årsmöte den 27 augusti 2002.
The fate of the European Union’s expansion to 25 nations is in Ireland’s hands, Denmark’s Prime Minister has said. Anders Fogh Rasmussen, who takes over the EU presidency next Monday said another Irish ‘‘no’’ to the Nice Treaty which makes enlargement possible would throw the whole project into doubt. Speaking late last night in Copenhagen he said it would be a ‘‘political disaster’’.
Another
"No" expected in Ireland
EU Observer 2002-08-21
What to do if the Irish say No
By Kirsty
Hughes, Financial Times, August 5 2002 21:06
Ratifying Nice treaty poses big challenge
(Ireland)
Financial Times, May 19 2002 21:17
Tillbaka till globaliseringen
(buffertfonder, guldmyntfoten , Lars Jonung)
DN-ledare 2002-03-07
Sverige måste välja: antingen bli en bra EMU-medlem som Irland,
eller följa den stela tyska ekonomin i
spåren.
TO THE PRIME MINISTER OF SWEDEN
We, the undersigned representatives of Irish organisations opposed to the Treaty of Nice which are currently taking part in Irelands National Forum on Europe in Dublin, appeal to you to ensure that the Swedish Government does not proceed with ratification of this Treaty in view of the Irish peoples refusal to ratify it in their referendum last June.
Folkomröstning om Nice i Irland
Ulven i EU:s fårakläder
avslöjas (Irland)
Björn von der Esch i SvD 2001-06-13
The Gothenburg summit of the European Union on June 15th
The
Economist 2001-06-13
was meant to mark the progress made towards
bringing as many as 12 new members into the EU. But an Irish referendum
rejecting the treaty which provides the basis for the EU's enlargement has been
a setback, sowing dismay and confusion
IF IRISH voters were concerned about their loss of influence in an expanding European Union, they must be rather gratified by the splash they made in their vote last Thursday. On a low turnout, of 35% of the electorate, 54% of voters—a mere 530,000 people—have managed to throw a serious spanner in the EU’s works: the only country to require a referendum to ratify the Treaty of Nice voted to reject it.
”Nej betyder nej även
från Irland”
Margit Gennser i Sydsvenskan 12 juni 2001
Måndagen den 11 juni i riksdagen, i anförande nr 51, sade Bo Lundgren (m):
Utfallet av den irländska folkomröstningen om Nicefördraget är mycket oroande. Den är en följd av lågt valdeltagande och en obehaglig kampanj av nationalister och vänstergrupper. Det är en kampanj för slutenhet och nationell egoism. Detta leder till att Europadebatten måste förnyas – där är vårt ansvar gemensamt – och ta sin utgångspunkt i de grundläggande värden; frihet, demokrati och fred som är grunden för den europeiska unionen. Det är dags att ta strid med de grupper som bekämpar öppenhet och fri handel.
Irisk skugga över Göteborg
Borås Tidning 2001-06-10
Johan Andersson Sundeen
Nej-sidans seger på
Irland
Rolf Gustavsson i SvD 2001-06-08
The Irish should be nasty to Nice
By Quentin Peel, Financial Times, October 1 2002 20:01
A dreadful thought is gradually dawning in the corridors of power of the European Union. In rather less than three weeks' time the voters of Ireland may well decide for a second time not to ratify the Treaty of Nice in their forthcoming national referendum.
At this moment nothing is certain. But the latest opinion poll published by the Irish Times shows a narrower margin of support than there was only days before the last referendum in 2001. That one was lost by 54 to 46 per cent.
If the Irish vote No to Nice they could hold hostage the entire enlargement process of the EU, intended to admit 10 new member states from eastern and southern Europe by 2004. The Nice treaty is the crucial enabling document setting out the new decision-making rules for an enlarged EU. It has to be ratified by all 15 member states for a new voting system to come into effect.
It is ironic that it should be a referendum in Ireland, a country that is normally extremely positive in its attitudes to the EU, that calls so much into question. The country has benefited financially more than any other member state, with the possible exception of Luxembourg. It looks ungrateful to say No now.
The trouble is, it is a lousy treaty that deserves to be rejected. The EU will become more clumsy, more opaque and more unintelligible to ordinary people once it comes into effect. What is needed is a simpler system - a straightforward double majority of member states and their populations. But that was not acceptable to France, because it would have given Germany a bigger influence. At Nice, Britain and Spain backed Jacques Chirac, the French president who was in the chair.
In fact, it would not be a disaster at all for the EU if Ireland voted No on October 19. It would be a very good thing. If it delayed enlargement for a few months, that would be a small price to pay for democracy. It might force the member states to pay a little more attention to their voters and scrap a bad treaty once and for all.
Another "No" expected in Ireland
EU Observer 2002-08-21
The most likely outcome of the second Irish referendum on the Treaty of Nice, according to the Economist Intelligence Unit, is another "No" vote."
A general election in the country four months ago have not brought much change, but although the result may be closer than initially anticipated, the most likely outcome is still another 'No', the EIU predicts.
Ireland's government and others across Europe were aghast in June 2001 when, on a turnout of just one third, Irish voters narrowly rejected the treaty, the Unit reports. The acrimoniously negotiated Nice treaty, which requires ratification by each of the 15 existing member states before entering into force, was framed to prepare the Union for a raft of new members.
The most recent opinion poll, taken in May, showed that support for Nice had sunk to a record low.
What to do if the Irish say No
By Kirsty
Hughes, Financial Times, August 5 2002 21:06
This autumn, European Union enlargement will at last enter its endgame, when 10 countries are due to complete negotiations for membership. Last-minute cliff-hangers on the budget and agriculture before a deal is clinched are inevitable and have been long foreseen. And while there is still no deal on Cyprus, the Helsinki Summit three years ago cleared the way to admit a divided island if necessary.
But the most serious obstacle, not anticipated in the many years of enlargement preparation, is the Irish referendum. Having rejected the Nice treaty in a referendum in June last year, Irish voters are to be asked - probably in October - to think again. The treaty, which details the institutional arrangements for an enlarged EU, has to be ratified by all 15 EU states to become binding.
Politicians in Ireland and from across the EU are scrambling to present a united front, insisting that a second "No" will stall enlargement, creating a political crisis. Upping the ante, they insist there is no plan B. Nice, they say, is vital for enlargement. Bertie Ahern, Ireland's prime minister, has appealed to voters not to tell the 10 candidate countries to "go to hell". Anders Rasmussen, the Danish prime minister, declared on taking over the EU presidency in July that "a new 'No' [would] jeopardise the whole enlargement process".
The European Commission has said it has no contingency plan. Irish voters are not convinced. They are well disposed towards enlargement but dubious about Nice. A recent opinion poll showed 60 per cent in favour of enlargement and only 17 per cent against, above the EU average.
But on the forthcoming referendum, opinion looks split evenly between Yes, No and Don't know. Treaty supporters are hoping a stronger Yes campaign will lift voter turnout from its low of a third last summer and reverse the 54:46 per cent rejection of the first referendum.
Ratifying Nice treaty poses big challenge
(Ireland)
Financial Times, May 19 2002 21:17
Nice was one four-letter word noticeable by its absence from the Irish general election campaign. But the need to ratify the European Union treaty on enlarging to the east before the end of the year is arguably the biggest single challenge facing the new government.
Last June, much to the surprise of Ireland's European partners, the Irish, long seen as one of the most pro-European electorates, rejected the treaty in a referendum.
On a turnout of just 34 per cent, Ireland voted No by a margin of 53.9 per cent to 46.1 per cent.
According to an eve of election poll in the Irish Times, voters are for the first time evenly split on whether they support the treaty. Some 32 per cent said they would vote for the treaty, down eight points on a previous poll in January, while the number of those prepared to vote against rose three points to 32 per cent.
The new government is expected to secure a declaration from its EU partners at the Seville summit in June reassuring the No camp that Ireland's neutrality is not jeopardised by participation in the European rapid reaction force.
But the Economist Intelligence Unit in a report in April concluded the Irish were "more likely than not" to reject the treaty a second time, which it said would "convulse the EU, raise serious doubts about its enlargement and precipitate one of the most serious crises in Ireland's foreign relations in the state's 80 year history".
Dan O'Brien, author of the report, says the political class, all of whom favour enlargement and support the treaty, believes the challenge is "simply to fill the information gap".
Svenska regeringen
erkänner att lagligheten i riksdagens ratificering av Nice-fördraget
kan ifrågasättas
Ur Prop. 2001/02:72 Ändringar i
regeringsformen samarbetet i EU m.m. Sid 31 ff
JOINT STATEMENT ON THE IRISH
REFERENDUM BY
GÖRAN PERSSON, PRESIDENT OF THE EUROPEAN COUNCIL AND
PRIME MINISTER OF SWEDEN
AND ROMANO PRODI, PRESIDENT OF THE EUROPEAN
COMMISSION
We are very disappointed at the result of the referendum in Ireland. Nonetheless we fully respect the outcome of this democratic process.
We know that the Irish Government and the Irish people are committed to the enlargement process. We trust that the Irish Government will make every effort to secure ratification within the agreed time frame.
The Presidency and the Commission are ready to contribute in every possible way to help the Irish Government find a way forward, taking into account the differing concerns reflected by this result, without changing the substance of the Nice treaty.
Meanwhile, of course, the work of the Union must continue and the Member States and the Commission will pursue the enlargement negotiations with undiminished vigour and determination, in line with our firm commitment given to the applicant countries.
The objective of an enlarged Europe must be realised. We must now find the most appropriate way to pursue the goals decided upon at Nice. Our will to secure the accession of new members must be clearly demonstrated.
The Presidency and the Commission are in the process of consulting the Irish Government and all other Member States in order to assess all the aspects of the outcome of the referendum. The meeting of the General Affairs Council on Monday 11 June will provide the first opportunity to discuss this matter.
This situation undoubtedly underlines the need for greater efforts from all of us to explain Europe to our citizens and to involve them more thoroughly in the debate about the Union, its role and its future direction.
Naughty or Nice?
The Wall Street Journal Europe, June 11,
2001
What do you call it when just under a million voters of a European island nation dash the aspirations of a continent of some 450 million souls?
To some, it is democracy in action. To others, the ungrateful greed of one the EU's most subsidized nations.
Still others are sure it is the reflexive close-mindedness of a traditionally inward-looking people. A fourth camp maintains that the embarrassment doled out to the Eurocrats by the Irish was payback for the slap on the wrist Ireland received in February for daring to continue its tax-cutting ways.
In all likelihood it is a little bit of all of them, with some extra ingredients such as concerns about Ireland's neutrality and a reaction to leftist warnings of a future "corporate" Europe -- whatever that means.
But we do know that the Irish do not have a history of euroskepticism comparable to Britain's. As an island nation on the edge of Europe, the threats of a flood of cheap East European workers probably did not loom as large in Irish concerns as it does in border countries such as Germany and Austria.
We also know that although Ireland has fed handsomely at the EU farm and regional subsidy trough, its sizable budget surpluses and rising living standard will soon make EU aid a thing of the past, irrespective of any crowding out that might occur when the EU takes on new subsidy burdens through expansion eastward. Indeed, the possibility of the loss of regional aid did not loom large in the campaign rhetoric or posters of the No campaign, which was spearheaded by a motley crew of hard-core leftists, pacifists and Irish nationalists.
Though many may think that the low turnout allowed fringe groups to carry the day, that's not quite the whole story, either. Of the 41 constituencies reporting results, 39 of them voted against the treaty, the only exceptions being Dublin Southwest and Dun Laoghaire, Dublin's port city.
This broad opposition came despite support for the treaty from all of Ireland's mainstream parties, both in the government and in opposition.
We last saw this kind of popular revolt against the opinions of the ruling class in Denmark, which last year defied its professional politicians by voting against joining the euro.
Should Tony Blair ever call his long-awaited referendum on British membership in the euro, all polls indicate that, Labour's overwhelming popularity notwithstanding, the pound would win and the euro would lose, despite the government's support for joining.
The lesson we draw from these periodic bouts of discontent with "Europe" is not that voters are predominately euroskeptic or are more concerned about protecting what they have than about making way for the future. We take it, rather, as yet another warning that the people of Europe still cherish their democratic prerogatives, and do not take it kindly when they feel that they've been neglected or trampled.
In Ireland, the most obvious candidate for a catalyst for last week's vote was the European Commission's February decision to reprimand Ireland for its fiscal policy, in spite of Ireland's low debt and budget surpluses. Nice was fundamentally a technical treaty, and as Deputy Prime Minister Mary Harney, who writes nearby, acknowledged in a recent interview, it is hard to sell a treaty without a clear message behind it.
But it was not hard for the average Irishman to understand that his government wanted to cut taxes, and technocrats in Europe tried to stop it.
Given this undercurrent of concern for national sovereignty, it would be a grave mistake, as Ms. Harney indicates in her piece alongside, for the EU to blithely ignore the Irish vote or treat at as a nonevent in the process of ratification.
It would make a mockery of the ratification process if the question were simply resubmitted to the Irish voters until they came back with the "right" answer.
For the Commission to issue, as it did, a statement saying "We trust the Irish government will make every effort to secure ratification within the agreed timeframe" only exacerbates the situation.
Like it or not, the Irish have spoken.
The Commission and the Irish government are well-advised to listen carefully to what they have said, and go forward from there. This may mean tinkering with the treaty to address Irish concerns; if this is not possible, a new treaty may need to be written.
All that said, however, it remains true that the vote last week may be more representative of the views of the Irish left than of the electorate as a whole. At some point, the government may have to go back to the voters and remind them that those who support a positive vision for Europe would do well to bestir themselves to vote and make their wishes known.
An upset for Europe
Quentin Peel, Financial Times, June
11, 2001
Last week, the republic of Ireland was regarded in the rest of the European Union as one of the most positive and enthusiastic supporters of the EU and all its works.
That was before Thursday's Irish referendum on the treaty of Nice. The reforms, intended to provide the legal basis for enlargement of the Union to include 12 new members from eastern and southern Europe, were rejected by Irish voters.
This weekend the entire political establishment in Dublin was involved in a damage limitation exercise to indicate that, in spite of voting "no" to the treaty, one of the smallest member states would not disrupt the biggest political project on the European agenda.
The vote is an acute embarrassment for the Irish government and for all the EU leaders, coming just days before their first meeting with George W. Bush, the US president. Instead of presenting enlargement as a fait accompli, they will be demonstrating what a difficult and divisive political process it is, throughout Europe.
The Celtic tiger owes a lot to Brussels' investment in infrastructure, education and training for its extraordinary economic performance over the past decade. Perhaps most important, Ireland has managed to redefine its national identity through membership of the EU and overcome its obsession with its former colonial ruler in neighbouring Britain.
As a result, the republic has consistently topped the polls for trusting the EU and all its institutions. Yet Irish voters have now refused to incorporate the Nice treaty into the Irish constitution, by almost 54 per cent to 46 per cent. They are in effect blocking its required ratification by all member states.
The vote, on a turnout of barely 30 per cent, stunned the Irish political establishment and caused consternation in the rest of the EU and dismay in eastern Europe.
This week's summit in the Swedish port of Gothenburg was supposed to celebrate the steady progress towards the next phase of enlargement and even fix a firm date for its conclusion. Goran Persson, the Swedish prime minister, and Romano Prodi, president of the European Commission, were at pains to insist on Friday that nothing would delay the process.
But the Irish referendum has undoubtedly thrown up a roadblock that will now have to be removed, quite apart from stoking up resistance in other member states.
Whatever the motivation, the vote means that for the second time in less than a year, a motley group of activists from the left and right has upset the pro-European plans of their own political establishment and voted against the plans drawn up by the 15 EU governments.
Last September in Denmark, a country with a long tradition of Euroscepticism, the decision simply meant not joining the single currency. Ireland's decision on the Nice treaty is comparable, rather, with the Danish rejection of the Maastricht treaty in 1992, for both agreements are constitutional documents requiring ratification of all member states to come into effect.
The low turnout across Ireland, even more pronounced in traditionally pro-EU rural areas than in the newly prosperous cities, was undoubtedly crucial in the victory of the No campaign.
This brought together Sinn Fein, the nationalist republican movement, the environmentalist and pacifist Green party, other supporters of Irish neutrality, the far left, and assorted traditional nationalists.
They were opposed by the entire political centre: Fianna Fail and the Progressive Democrats from the government and Fine Gael and the Labour party from the opposition.
The No campaign adopted the simple and sweeping slogan that a vote for Nice meant "You will lose power, money and freedom". The countryside was plastered with posters to that effect, while the Yes campaigners were virtually invisible.
The problem for the Yes side was that the Nice treaty was unintelligible for most voters. A week before the referendum, more than 50 per cent said they did not understand it, or know even vaguely what it was about.
The treaty introduces a complex triple-majority system of voting in an enlarged EU. Once in force, any decision taken must be supported by a simple majority of member states, by 62 per cent of their combined population and by a "qualified majority" of the members.
The last is based on an arbitrary table of voting weights, making some allowance for the difference in size between Germany at one end and Luxembourg at the other. It is horribly complicated, the result of four days and nights of haggling between big and small members at the EU summit in Nice last December.
In addition, the treaty introduces more majority voting and sets a ceiling on the size of the European Commission of one member per country, up to 27. It also provides a minimal legal framework to set up a European "rapid reaction" defence force, in which members can participate as their national parliaments decide.
Fears for traditional Irish neutrality were one important factor fuelling the No vote. In trying to reverse it, the Irish government will probably seek reassurances on that score from its EU partners. They could be attached to the treaty.
The rest of the doubts are more difficult to answer, for they go to the heart of the EU process of simultaneous deepening and widening. They concern fears about a loss of identity in an ever larger union and a fear of the cost of enlargement in a country that has always been a big net beneficiary.
At Gothenburg, Spain is determined to get a declaration promising some protection from a massive switch of funds to poorer eastern Europe.
That is one fundamental issue that has emerged in recent weeks, as the enlargement negotiations have finally got to the most difficult issues, including free movement of labour and capital, agriculture and distribution of the structural funds.
The problem is that difficult issues such as agricultural reform have all been postponed. Funding of enlargement has been fixed for the near term - up to 2006 and possibly as far as 2013 with a bit of budgetary dexterity. There is no clarity on who will pay to help eastern Europe catch up in the medium term.
It is those sorts of questions, along with the perception that an enlarged EU is becoming increasingly complex and ever more distant as well as more arbitrary and less democratic, that seem to be fuelling revolts as in Ireland and Denmark. Both countries are positive about enlargement in principle but clearly hesitant about the consequences.
The lesson of the Irish referendum is that far more effort will have to be made to engage ordinary people in the European process if they are to be persuaded to accept an enlarged and more complex EU.
Not Nice
Financial Times editorial, June 11, 2001
The voters of Ireland have rejected the treaty of Nice - the package of institutional reforms intended to clear the way for enlargement of the European Union - in a referendum. That is not merely humiliating for the Irish government, which campaigned for a "yes" vote. It should also come as a salutary shock to all the other 14 EU member states.
The fact that less than a third of the Irish electorate bothered to vote was in no small part a reflection of the complexity and apparent irrelevance of what they were being asked to decide on. The Nice treaty is a sorry compromise, the result of the worst sort of inter-governmental horse-trading. It seeks to introduce a very complicated voting structure for the enlarged EU and a clumsy compromise on the future size of the European Commission. No ordinary voter can be expected to understand it, let alone be enthusiastic about it.
Those in favour argue that the treaty is essential to clear the way for the emerging democracies of central and eastern Europe to join the EU. That failed to persuade a majority of Irish voters. Like many others in the EU, they remain unconvinced of the benefits of enlargement and fearful of the costs.
Political leaders across the Union have failed to make the case for this historic step. They have prevaricated while enthusiasm has evaporated. If it is going to happen, as it must, a far more energetic case must be made for it in countries such as Britain, France, Germany and Spain, as well as in Ireland.
The Nice treaty is about core constitutional arrangements in the EU. It has to be ratified by all 15 member states, although Ireland is the only one that felt the need to hold a referendum. But Irish objections were many and varied and they will not be easy to answer.
Some voted "no" because they fear that Irish neutrality will be compromised by the proposals for a European peacekeeping force.
Others believe Irish sovereignty is threatened and fear becoming irrelevant in a larger EU dominated by the big member states. Undoubtedly some want Ireland to have all the benefits of EU membership and none of the costs.
Mere assurances, or minor treaty amendments, will not satisfy them. Renegotiating the Nice treaty is not an option any EU leader will want to follow but it should not be excluded. The present treaty is a poor compromise and could well be improved.
But that must not be an excuse for delay, which would destabilise the accession candidates and risk a further decline in popular support in the existing member states.
Irland
Ur Di 2001-06-11
Nicefördraget som beslutades i december måste godkännas i alla medlemsländer innan det kan träda ikraft. Så om inte irländarna kan förmås att hålla en ny folkomröstning om ett ändrat fördrag, så hotas hela utvidgningen. Det förnekas av den ansvarige EU-kommissionären, Günter Verheuegn. Han hävdar att processen fortsätter som tidigare och att de första nya länderna ska tas in så de kan vara med och rösta i nästa val till EU-parlamentet i juni 2004.
"Så länge Nicefördraget inte trätt i kraft, så kan EU bara släppa in fem nya medlemsländer", säger en EU-tjänsteman. "Därför finns det nu två möjligheter." "Det ena är att regeringscheferna antar en deklaration vid toppmötet i Göteborg eller senare om att utvidgningen kan äga rum ändå. Den andra möjligheten är att de ändrar Nicefördraget och att Irland håller en ny folkomröstning om detta fördrag." 22 omröstningar om EU
Irland har hållit 22 folkomröstningar om EU sedan landet blev medlem. Tidigare har EU-stödet på Irland varit massivt, eftersom landets snabba ekonomiska utveckling gjorts möjlig genom generösa EU-bidrag. Men i går handlade det om stödet för en utvidgning och då visade irländarna att de inte vill ha in fler länder som ska konkurrera om EUs pengar.
Av de 2,9 miljoner röstberättigade irländarna var det bara 30 procent eller 870.000 som röstade, vilket är det i särklass lägsta valdeltagandet hittills. Det är enligt Irlands premiärminister Bertie Ahern en viktig orsak till att det blev ett nej.
Entusiasmen för utvidgningen är låg även i övriga EU-länder, bortsett från de nordiska, men Irlands nej kommer ändå som en chock. Utvidgningen ses som EUs viktigaste fråga av politikerna, men det är bara en tredjedel av EUs befolkning som stöder projektet.
Ireland's
anti-Euro activists hope for surprise 'No' vote
By Ambrose
Evans-Pritchard, Daily Telegraph 2001-06-07
IRISH Eurosceptics say they are
confident they can pull off a surprise victory in today's referendum on the
Nice Treaty as the Republic's voters grow alarmed about the superpower
ambitions of the European Union.
Eliten smyger
undan debatten
DN-ledare 2001-06-07
LITE I SKYMUNDAN
pågår ett drama som kan kasta in EU i en konstitutionell kris och
försena utvidgningsprocessen. I dag folkomröstar de alltmer
EU-skeptiska irländarna om Nicefördraget. Vad som såg ut att
vara en formsak har plötsligt blivit en betydligt mer osäker
affär.
Curbing
Unemployment in Europe:
Are There Lessons from Ireland and the Netherlands?
Federal Reserve Bank of New York
Current Issues in Economics and
Finance
May 2001 Volume 7, Number 5
Ireland
In an unprecedented breakthrough on the Irish Nice Treaty campaign, the three
major Sunday newspapers in Ireland all carried opinion, analysis and articles
critical of the Nice Treaty and condemned the Irish government's treatment of
the opposition campaign.
Furthermore, the normally cautious Sunday Business
Post - the business, politics and economics paper - carried an editorial on
Sunday which strongly suggests that people vote no to Nice. “For the first
time we're thinking of voting 'no' - unless we can get real answers to serious
questions between now and polling day,” the leading article said.
Ireland's
love affair with Europe starts to unravel
Daily Telegraph
2001-05-04
Talk in Brussels is beginning to turn to the poll on June 7. Not
the British election, but Ireland's referendum on the Nice Treaty. The Irish
are alone in the EU in being offered a direct say. If they vote "no", the
entire deal will need to be renegotiated - a prospect that, after the
ill-tempered scrapping that accompanied the last summit, fills Eurocrats with
horror.
Picking on the
wrong target (Ireland)
Martin Wolf i Financial Times, February 14,
2001
Bo Lundgren på moderat.se
2001-02-13
Det
är allvarligt att Göran Persson nu utesluter att Sverige inför
euron före 2005. Medborgarna går därmed i flera år
miste om lägre priser till följd av bättre konkurrens och
lägre räntor till följd av mindre osäkerhet. Man skulle
kunna genomföra en folkomröstning redan i höst
eller nästa vår.
EMU:s rätta
ansikte
Huvudledare av Håkan Larsson i Östersunds-Posten
14/2 2001
Britain and Ireland refuse to
obey Brussels on spending
Daily Telegraph 2001-02-13
EU frågar och svarar själv om Stabilitetspakten
Svensk Handel om EU-kommissionens kritik av Irland: Konkurrens bättre än skatteharmonisering
Irish finance minister rejects EU
reprimand
Financial Times, Last Updated: February 12 2001 16:47GMT
Tiny Ireland Becomes Test Case For Enforcement of
EU Rules
Wall Street Journal 2001-02-12
Men det regnar ju i Frankfurt
Gunnar
Örn i Dagens Industri 2001-01-29
Irland
avgör EU:s utvidgning
Folkomröstningen på torsdag i
Irland om EU:s Nicefördrag kan bli en vändpunkt för unionen. Om
nejsidan vinner i detta tidigare så EU-positiva land innebär det
problem för Irlands ställning i unionen och för hela
frågan om EU:s utvidgning.
Nyhetsartikel DN 2001-06-05
Pressmeddelande
2001-01-29
Svensk Handel om EU-kommissionens kritik av Irland:
Konkurrens bättre än skatteharmonisering
- Irlands ekonomiska framgång med en tillväxt på 10 procent under förra året förtjänar beröm och inte kritik. EU-kommissionens varning i förra veckan till emu-landet Irland har väckt berättigat uppseende. Det säger Carl-Johan Westholm, Svensk Handels VD, med anledning av den rapport om Irland som Svensk Handel presenterar idag.
- Irland har ett överskott i statsbudgeten på nära 5 procent av BNP, en arbetslöshet under 5 procent, stor invandring - 3 000 svenskar arbetar idag i Dublin - och en statsskuld på bara 39 procent av BNP. Irland är ett föredöme, menar Westholm.
I Svensk Handels rapport, som är skriven av Håkan Gergils, framgår att Irlands ekonomi har utvecklats i raketfart, med en ökning av BNP på 9-10 procent årligen sedan 1993. 1999 var landets BNP per invånare 26 procent större än Västeuropas i genomsnitt.
- Irlands vice regeringschef Mary Harney har besvarat EU-kommissionens kritik med att Irland förtjänar applåder, inte reprimander. Det verkar som om EU-kommissionen inte gillar att ett medlemsland sänker skatterna mer än andra. Men konkurrens om den bästa arbetskraften genom låga skatter är ett framgångsrecept för hela Europa. Dessutom fungerar ekonomin effektivare, om inte höga skatter stör det frivilliga samarbetet mellan människorna, säger Carl-Johan Westholm.
http://www.svenskhandel.se/templates/artikel.asp?AID=213
Irlands rekordhöga tillväxt
är ett minne blott
BNP växte bara med 0,5 procent i
årstakt under första kvartalet i år
Dagens Industri,
Gunnar Örn, 7/8 2003
"Den keltiska tigerns tid är förbi", konstaterar OECD i sin senaste analys av öns ekonomi.
Läget är egentligen ännu värre än vad BNP-siffrorna visar. En mycket stor del av Irlands produktion sker i dotterbolag till utländska jättekoncerner, främst amerikanska läkemedels- och datajättar som Pfizer och Microsoft.
Räknar man bort de vinster, som de utlandsägda bolagen plockar hem från ön, visar det sig att irländarna haft nolltillväxt i två års tid: Irlands BNI (bruttonationalinkomsten) har inte vuxit alls sedan början av 2001.
BNI är BNP justerad för "faktorinkomster" (räntor, vinster och löner) som betalas från och till utlandet. På Irland anses BNI vara ett bättre mått på den ekonomiska aktiviteten på ön.
Brendan Walsh, ekonomiprofessor vid University College i Dublin, har tidigare varnat för att de amerikanska data- och läkemedelsjättarnas skatteplanering blåst upp Irlands BNP-siffror. Irland har Europas lägsta bolagsskatt. Stora internationella bolag har därför ett starkt intresse av att lägga en så stor del som möjligt av sina vinster där.
De stora utländska investeringarna på ön har emellertid drivits av annat också, som att Irland har en ung och välutbildad engelsktalande befolkning.
Irish finance minister rejects EU
reprimand
Financial Times, Last Updated: February 12 2001 16:47GMT
Charlie McCreevy, Ireland’s finance minister, on Monday rejected an unprecedented reprimand from European Union finance ministers criticising Ireland’s tax-cutting 2001 budget.
Ireland, as expected, found itself isolated by other EU states which voted to back a proposal by the European Commission to tell Ireland to end the inconsistency between its expansionary 2001 budget and the EU’s broad economic policy guidelines.
According to a statement issued by the EU finance ministers, ”the Irish budget for 2001 is expansionary and pro-cyclical and therefore inconsistent with the European Union’s 2000 broad guidelines of the economic policies.”
It added: ”To remove the inconsistency with the broad guidelines engendered by the budget plans for 2001, the Irish government should take countervailing budgetary measures during the current fiscal year.”
According to a statement made by McCreevy to the Ecofin meeting: ”I have no problem with advice to Ireland setting out the council’s view of the appropriate policy mix for the future. This can take the form of an opinion, as is the normal course. It is very difficult for me, in the light of the comparative performance of the Irish economy, to see that any recommendation is warranted.”
Mr McCreevy defended the Irish government’s economic record, arguing that the country had managed to combine prudent economic policy during a period of rapid economic growth and entry to the euro-zone.
”The commission methodology overstates the extent of fiscal loosening substantially, due to once-off factors,” said McCreevy. ”We are running very large budget surpluses and setting aside substantial sums to fund future pensions while at the same time our public expenditure levels per capita are significantly below that of other EU countries.”
Tiny Ireland Becomes Test Case For
Enforcement of EU Rules
Wall Street Journal 2001-02-12
In a drama in miniature of the problems of euro-zone economic policy, European Union finance ministers meet Monday to decide on a proposal to reprimand tiny Ireland for failing to follow the EU's anti-inflation policies.
The meeting is mostly theater. Whatever the other EU countries decide at the meeting in Brussels, no one is expecting Ireland to change its expansionary fiscal policies, which, critics say, are fueling an inflationary bubble. Anyway, Ireland is too small to have any impact on the euro zone as a whole.
But in the political battle over whether a single currency implies a single economic policy, the dispute is being seen as a precedent for forcing the euro-zone governments to follow a common line and fine-tune their collective fiscal and tax policies.
Fans of European integration, including European Central Bank President Wim Duisenberg, want the meeting Monday to make the point by giving the wayward Irish a strong slap on the wrist. "We must be able to discipline even the best students in the class," says Romano Prodi, president of the European Commission, which formally submitted the proposal to reprimand Ireland.
No Policy Change Planned
Perhaps. But the effect of a reprimand could also be counterproductive. Critics worry that Ireland is being singled out only because it is easier to push around than larger, more powerful countries. And in using Ireland as a test case, some argue that the EU has simply got its sums wrong. Ireland's high growth rates and open economy should make it a model for the EU, not a subject of criticism, they say. "There will be no change in the budget and no change in economic policy," says Irish Finance Minister Charlie McCreevy.
At the heart of the dispute is the uncertainty surrounding the treaties that created the euro zone. Although they established a European Central Bank and a one-size-fits-all monetary policy, the EU still has only the most basic rules for fiscal or tax policy.
The EU treaties do set certain requirements on fiscal policy that are backed up by the threat of fines -- for example, a limit on budget deficits of 3% of gross domestic product. But because all EU countries have met these criteria, all that remains is a vague and bureaucratic system of peer pressure.
Under this process, Ireland pledged last year to try to bring down its inflation rate, which in 2000 ran at 5.6%, more than twice the EU average of 2.3%. Acknowledging that this was an aberration from the overall euro-zone goal of price stability, Ireland signed on to an EU policy paper that called on it to slow the economy and cut inflation.
But in its budget for 2001, an election year, Ireland passed a slew of tax cuts and spending measures totaling 2 billion pounds ($2.35 billion or 2.54 billion). The government contends that, even with this package of tax cuts, it will be able to turn in a budget surplus and slash state debt. Moreover, it argues that the cuts in direct taxes will generate a one-time reduction in inflation.
The Irish government also dismisses the contention that its loose fiscal policy lies behind its high inflation. Rather, external factors, namely the weak euro and high oil prices, are to blame, the government contends. "Budget policy in a small, open country does not drive inflation as it would in a large, self-contained economy," said a government aide of Mary Harney, Ireland's deputy prime minister.
The latest increase in spending would add just 0.31 percentage point to inflation after three years, according to studies cited by Ms. Harney. She has called for the European Commission to conduct a formal review of small, open economies within Euroland, which she says would be useful as the EU and eventually the euro area expand eastward to include such economies.
Irish Inflation Falls
Mr. McCreevy's expected case Monday that Ireland's inflation is under control given its 10% growth in 2000 will be helped by the latest figures published Friday.
Year-to-year consumer-price inflation in Ireland slowed to 5.2% in January from 5.9% in December. And on a harmonized basis, the measurement used by the EU, it fell to 3.9% in January from 4.6% in December -- which is below the Dutch figure and about one percentage point higher than the expected EU-wide figure for January.
Monday's EU meeting will likely agree with the commission, however, that Ireland's fiscal loosening is "pro-cyclical" and "expansionary." What happens next is unclear. Ireland has already said it has no plans to rewrite its budget, and the EU has little else it can do.
Economists say the strength of the EU reprimand may give a clue to whether the EU will try to push harder against other countries with dubious fiscal policy. "The Irish question is really a Trojan horse for the debate on France and Italy," says Patrick Mange, chief economist for Merrill Lynch in Paris.
For instance, France did little last year to reduce its budget deficit, despite higher-than-expected growth. The French budget for 2001 predicts a 1% shortfall, little improved from 1.2% in 2000. The commission issued an opinion that this was not "fully consistent" with EU economic policy. But with elections next year, the French government is unlikely to change policy, and unlike Ireland it has plenty of weight in the EU political structure.
All of this will fuel arguments over whether the EU should impinge on national economic sovereignty. For its part, Ireland feels unfairly picked on. Though support for the EU and the euro remain high in the country, the Irish media speculate that the real reason for the reprimand is that Ireland's low tax rates have led to a flood of direct investment from the U.S. and elsewhere, to the detriment of other European countries. In 1998, for example, Ireland attracted $751 million (810.9 million euros) in direct investment from the U.S., more than did the rest of Europe combined.
A German government official, who asked not to be named, said the action on Ireland amounts to "a signal." He added, "It connects to the euro question in the end and what extent we are able to watch over economic and financial policy when we're sitting in the same boat."
But most market economists doubt that this political debate will affect the euro soon. With most EU governments now at or near balanced budgets, they argue that the effect of fiscal policy on the euro is limited. And markets have in any case already accepted that EU economic policy will remain fragmented. "Markets have been very much aware for some time of the limits of having a unified monetary policy without a unified fiscal system," says Julian Callow, senior economist for Credit Suisse First Boston (Europe).
Men det regnar ju i Frankfurt
Gunnar Örn i Dagens Industri 2001-01-29
Irland blir ett testfall på hur ett litet land klarar EMU-anpassningen i ett läge där landets konjunktur hamnat helt ur fas med de stora medlemsländernas. Hittills ser det inte direkt lovande ut. Sedan Irland gick med i EMU har inflationen i landet stigit till den högsta nivån på 15 år.
Den överhettade irländska ekonomin skulle må bra av en penningpolitisk avkylning i form av högre räntor, men det är numera praktiskt omöjligt. Från januari 1999 sätts den irländska räntan inte i Dublin utan i Frankfurt. Europeiska centralbankens styrränta är gemensam för alla medlemsländer i valutaunionen.
När ECBs chefer bestämmer styrräntan måste de titta på det ekonomiska läget i "Euroland" som helhet. De kan inte ta någon särskild hänsyn till den lilla irländska ekonomin, som bara svarar för 3 procent av hela eurozonens BNP. Irland har därför fått dras med en penningpolitik som är mer anpassad för tyska och franska förhållanden än för irländska.
Och i takt med att ECB försökt värma upp den underkylda kontinentaleuropeiska ekonomin, har temperaturen stigit i den redan överhettade irländska. För Irland finns det förstås alternativa metoder. Kan man inte använda räntevapnet för att hålla inflationen nere, går det ändå att kyla av ekonomin med hjälp av finanspolitiken, det vill säga med höjda skatter och/eller sänkta statsutgifter.
Regeringen i Dublin, med finansminister Charlie McGreevy i spetsen, har emellertid inte gjort några ansatser i den riktningen. Tvärtom. I sin senaste budget föreslår den sänkta skatter och höjda statsutgifter.
McGreevys expansiva budget har fått EU-kommissionen i Bryssel att reagera. I förra veckan fick Irland en direkt varning: "Den budgetpolitik irländska regeringen lagt för de närmaste två åren med ökade offentliga utgifter och skattesänkningar bidrar till ökad privatkonsumtion i en redan överhettad ekonomi och bidrar till att spä på en redan hög inflation. En sådan politik strider mot EUs ekonomiska riktlinjer, vilka Irland bröt mot redan förra året." Ärendet går nu vidare till EUs finansministerråd, Ekofin.
Vid mötet den 12 februari får Ekofins ordförande - för närvarande Sveriges finansminister Bosse Ringholm - den delikata uppgiften att läxa upp sin irländske kollega och kräva en stramare finanspolitik. Men varken kommissionen eller ministerrådet kan tvinga den irländska regeringen att riva upp sin budget. Den kan bara utöva vad som på engelska brukar kallas "peer pressure", eller moraliskt tryck.
Regeringen i Dublin visar heller inga tecken på att vilja lyda Bryssel: "Mitt svar är att den politik Irland fört ligger bakom den ekonomiska succén", sa Charlie McGreevy i en första kommentar till kommissionens varning. "När andra länder i Europa når samma framgångar kanske jag tar större intryck", tillade han. McGreevys vägran beror inte bara på nationell självbelåtenhet.
Den expansiva budgeten hänger starkt ihop med Irlands tradition av så kallad förhandlad inkomstpolitik: Fackföreningarna får skattesänkningar i utbyte mot låga löneökningar. Att riva upp budgeten vore detsamma som att riva upp det stora "samhällskontrakt" som gett republiken tio år av välstånd och arbetsfred. Dessutom är det allmänt känt hur svårt folkvalda politiker har att strama åt i goda tider.
Varför ska de behöva höja skatterna/ skära ned utgifterna när budgeten redan visar stora överskott? På så sätt påminner Irland om Sverige i mitten av 1980-talet. Dåvarande Riksbankschefen Bengt Dennis kunde heller inte använda räntevapnet för att kyla av den överhettade ekonomin, eftersom penningpolitiken var låst av den fasta växelkursen. Och finansministern Kjell-Olof Feldt lyckades aldrig övertyga vare sig väljarna eller partimedlemmarna om behovet av finanspolitiska åtstramningar.
Lösningen kan vara att underkasta sig någon form av yttre disciplin, till exempel de ekonomiska riktlinjerna från EU-kommissionen, men att döma av det irländska exemplet verkar det inte vara någon framkomlig väg. Dublindemokrati och Brysselbyråkrati går inte ihop. Då uppstår den vidare frågan om en monetär union i längden kan fungera utan en politisk dito.
Klarar euroländerna en hårt centralstyrd ränte- och valutapolitik när varje land envisas med att bedriva sin egen, självständiga finans- och budgetpolitik? Om inte, hur ska en överstatlig finanspolitik se ut? Irland är ett testfall. Den nya svenska EMU-utredningen har anledning att titta extra noga på utvecklingen där innan den råder Sverige att gå med.
Ireland's inflation is not yet a
conclusive argument against 'one size fits all' monetary policy
Samuel
Brittan, Financial Times, October 26, 2000
The experience of Ireland will provide hard evidence on the economic case for Britain's adopting the euro.
The Irish economy is, in many ways, more like the British economy than that of continental Europe. A large proportion of its trade is with the UK. Its business cycle is more in line with the US and British than the continental one. In addition, its financial institutions are closer to the Anglo-American than to the Rhineland model.
It does, however, have a labour market subject to a corporatist-type incomes policy with the New Labourish title of the Programme for Prosperity and Fairness (PPF).
The eurosceptics are not waiting for further evidence before proclaiming that Ireland already provides a case against the euro. Irish inflation, at 6 per cent, is more than twice that of the euro-zone. But instead of being able to raise interest rates, the Irish Central Bank has had to accept relatively low rates designed for a European area that is growing more slowly and has had a good deal of slack.
At this point, however, one needs to be careful. The difficulty of peripheral regions in living with a centrally determined monetary policy is not confined to the euro-zone. Eddie George, governor of the Bank of England, has to wear protective clothing when he visits the north of England, where he is attacked for maintaining a monetary policy more suited to the booming south-east.
If there is a boom in Oregon, that state still has to accept a Federal Reserve policy designed to fit the whole of the US. Indeed, it is tempting to argue that the inflation rate in a monetary union is the rate at which that currency loses purchasing power over the whole zone. There cannot be a Scottish or a Texan rate of inflation different from that for the UK or the US.
What harm, then, can rising prices do in a euro region such as Ireland? If Ireland still had an independent currency, that currency would ultimately depreciate. The danger would be of an inflationary spiral in which the exchange rate and the internal value of money followed each other downwards. One benefit of monetary union is that this spiral cannot develop. For the crucial stage - an exchange rate depreciation that validates domestic inflation - is cut off at source.
The fundamental role of prices in a market economy is to convey information - eg, a rising price of oil indicates supply shortage. A drawback of inflation is that the information that should be conveyed by changes in relative prices is lost when the measuring rod - that is, money - itself depreciates at a fluctuating rate.
It helps to look at the US. Is an increase in prices in Oregon a sign of an inflationary disease or is it a relative price change of a fundamentally healthy kind, which attracts capital to Oregon and provides a slight competitive advantage to the rest of the US?
Some economists argue that Ireland is in a particular bind because it has no political scope for tightening fiscal policy, for under the PPF the government has promised further tax cuts in return for pay restraint. Enthusiasts for fiscal fine-tuning are often enthusiasts for incomes policies as well; and here the two enthusiasms get in each other's way. But that is hardly the fault of the euro.
In fact, members of existing federations, such as the US states or the German Lander, do not use variations in their budgets as a deliberate measure for smoothing the business cycle. They survive without the fiscal weapon.
Ireland's problems are those of prosperity.
The commonly cited 10 per cent growth rate is misleading, as international companies use transfer prices to take their profits in Ireland, which has a low rate of corporation tax. But, even at 6 or 8 per cent, the growth rate is the highest in Europe.
Ireland was a backward economy until a decade or two ago. But once international investors became convinced that the protectionist and inflationary policies of the De Valera regime had been jettisoned and there would be a stable business environment, investment flowed in to take advantage of the low labour costs.
A previously backward country can, of course, achieve a higher rate of productivity growth than its neighbours because it is catching up with best practice elsewhere. But the labour market is not divided into rigid segments. Wages that reflect productivity growth in the traded sector influence wages and prices in sheltered domestic sectors, where the opportunity for productivity growth is less.
Thus a country such as Ireland can have an "inflation rate" higher than its main trading partners without becoming uncompetitive.
Why worry then? An argument against benign neglect is that in a rapidly growing and overheated economy, credit will soar and demand be stimulated by far more than can be justified by differential productivity gains. If profits are squeezed in the export sector, Ireland could indeed become uncompetitive within the euro-zone. But to say this assumes that exporters, many of them large multinationals, would be so foolish as to grant pay and price increases that they know cannot be sustained under a regime where devaluation is no longer an option.
To the extent that overshooting of pay and prices nevertheless develops in the traded sector, the British eurosceptics would have won a point. To the extent that it does not do so, euro supporters will have the advantage.
We are left, then, with the problem of what to do about price increases in the Irish domestic sector. Whether we choose to call them inflationary or not, the symptoms are familiar: rapidly rising land and house prices in Dublin; waiting lists and labour shortages developing. A good many bogus cures are in circulation, most of them no more advanced than those of the Roman emperor Diocletian, who tried to control prices by edict.
Until recently the main safety valve against inflationary overheating was the influx of returning Irish workers - thus tackling inflation by increasing supply to meet the rise in demand.
But this safety valve may no longer be sufficient, unless Ireland adopts the fully liberal course of opening its borders to immigrants of any description, unskilled as well as skilled. And even a liberal could query the overspill costs of adding further to congestion and land hunger.
There is an unfashionable and unpopular formula, which is to let let economic forces have their sway. The normal way in which a boom was curbed under the gold standard was that as labour shortages developed, wages rose at the expense of profits and the incentive to invest declined, bringing with it an economic slowdown and an end to inflation. If the Irish pay accord prevents this from happening, it may have outlived its usefulness.
European Economies: Euro-Zone Consumer Prices Rose 0.2% in July
Brussels, Aug. 18 (Bloomberg) -- Consumer prices in the 11 countries that share the euro rose for a 10th month in July, reinforcing investors’ expectations that the European Central Bank will increase interest rates to ward off inflation.
Prices rose 0.2 percent from June, leaving the annual rate unchanged at a four-year high of 2.4 percent, the European Union’s statistics office said. The inflation rate breached the ECB’s 2 percent ceiling for a second straight month.
Manufacturers have seen raw material costs rise following a more than doubling in oil prices since the start of last year and the euro’s 22 percent drop against the dollar, which pushed up import costs. With the region’s economy growing at the fastest pace in a decade, some companies are finding it easier to pass higher costs along to their customers.
Ireland’s inflation rate, at 5.9 percent, was the fastest in the region, followed by Luxembourg at 4.7 percent and Spain at 3.7 percent. Germany, France and Austria had the slowest rates, at 2 percent. The variation underscores the difficulty of the ECB’s task in setting a common interest rate for 11 countries.
Irish luck
Financial Times, leader, 11-Aug-2000
All good things must come to an end. Ireland has enjoyed several years of rapid economic growth, spurred by productivity gains and a flood of investment. But as the International Monetary Fund warned yesterday, the strains are now starting to show.
Irelandsticks out awkwardly from its fellow members of the European single currency. Output growth over the past six years has averaged 8 per cent. At more than 5 per cent, inflation is well above the European average.
Behind these statistics lies a more complex story. Ireland has been in a period of transition, from a low-wage, low-productivity country to a high-technology economy. As productivity has caught up with European levels, so wages and prices have drifted upwards. This is a benign process in a single currency zone where members initially have different price and wage levels.
Unit labour costs in the manufacturing sector have actually tumbled. Ireland remains a competitive place to do business, as the continuing rise in foreign direct investment shows.
But with Irish gross national product now 90 per cent of the EU average, the period of catch-up is almost over. Ideally, Ireland might come to a soft landing. As wages and inflation rise, profit expectations should fall, investment growth should decline, and output growth ease.
The concern that the IMF raises, though, is whether the momentum in the economy is so great that instead of a gradual slowdown, it may overheat. And this, inevitably, would be followed by a painful correction.
Monetary policy in Ireland is clearly too loose. Consumer credit expanded by nearly 25 per cent in the year to May, stimulating a rapid rise in asset prices. House prices have gone up by more than 50 per cent in two years, raising fears of a crash.
And the very policy that has been credited with keeping Ireland's economy from overheating - the wage pact between the government and the unions - may yet prove to be the country's Achilles heel. Years of subdued wage growth have left people feeling that they deserve a bigger share of the pie. Wage settlements are already breaking through the agreed barriers, and the conditions are present for an acceleration in pay demands.
The government's side of the bargain is also causing trouble. The quid pro quo for moderate wage growth has been tax cuts - which, as the IMF pointedly says, are exactly the opposite of what the Irish economy needs.
The Irish need to steer towards a soft landing, without the rudder of interest rates. They will need a tighter fiscal policy, sensible supply side measures - and a a good deal of luck.
IMF warns Ireland on economy: Fund urges government to tighten
fiscal policy and resist further tax reductions
Financial Times ;
11-Aug-2000
In an otherwise bullish assessment of Ireland's "spectacular" economic performance, the IMF in its annual country report, warned of the "more pronounced" signs of overheating, compared with a year ago.
Inflation is running at 5.5 per cent, the highest for 15 years and more than twice the euro-zone average.
The IMF report described Ireland as "at the cutting edge of the debate" over the risks faced by the fast-growing countries at the fringe of the euro-zone. It said until now the impact of higher inflation had been "outweighed" by strong productivity growth and the weakness of the euro.
But it warned that "rising wage and price pressures could set the stage for a difficult adjustment later if the euro were to appreciate substantially".
Despite the euro's current weakness, most analysts believe a substantial appreciation is long overdue. With exchange and interest rate policy surrendered by joining the euro, Ireland relies on fiscal policy to fine tune demand.
The Fund said that while "moderate tax cuts under the national wage agreement should be respected, pressures for larger tax reductions should be resisted because such reductions would add to, rather than ease, the risks of overheating in the near term".
It also said that while the government was committed to major infrastructure spending to overcome supply bottlenecks, there would have to be "tight control over growth in other public spending".
Dermot O'Brien, chief economist with NCB stockbrokers, said the IMF was putting undue stress on wages and prices as determinants of competitiveness.
He said Ireland's export performance was driven by the multinational sector for whom the issue of wages was far less important than the availability of skills and the low corporate tax regime.
The IMF report said: "Overheating within a monetary union need not be resolved in a dramatic fashion", but warned that "if asset prices rise to unsustainable levels, a subsequent collapse might provoke significant problems for the banking sector that feed back into declines in output". ECB hints at rate rise,
