Wake-up call for the small nations of Europe

A Wake-up Call for
the Small Nations of Europe

Ed Walsh

The relief and satisfaction in Ireland, following the
Euro-summit, that reduced interest rates and extended loan repayment periods,
is similar to that of the inmate returned from solitary confinement to the regular
prison cell.

The reduction of the harshness of Ireland’s sentence was
triggered, not through compassion for a small country, but by financial market
events that threatened two large economies, Spain and Italy, and the future of
the Euro in a way that concentrated minds in Brussels and Berlin.  Finding rational solutions for economic
recovery in countries large and small has only now appeared on the EU agenda.  Prior to that the EU and the large countries
calling the shots were prepared to impose unhelpful penal conditions on Ireland  combined with pressure to raise corporate tax
in a way that would certainly undermine the healthy core of the Irish
economy.  To the government’s credit, and
members of the main opposition parties, Irish politicians have stood together
and faced down the corporate-tax threat. The line has been held….at least for
the moment.

But Ireland’s experience, while in the solitary confinement
cell, exposed hidden ugly and dangerous aspects of the European Union that lay
behind the fine Brussels rhetoric of solidarity and partnership. Our experience
during the past seven months has highlighted that the shots are increasingly
called by Berlin and only when Germany’s national interests are at stake is it
likely to pay attention.  Ireland’s
experience should be a wake-up call to the small nations of the EU: they cannot
necessarily expect to be fairly treated in distress.

If the financial markets had not pointed Spain and Italy
towards impending crisis the leadership in Germany and the strong states of
Europe would have happily gone on their summer holidays unperturbed that
Ireland still lumbered under the penal bail-out conditions imposed last
December. It was not any special pleading from Dublin, Lisbon or Athens, or
altruism in Berlin that altered our circumstances last Thursday.  Events in Madrid and Rome concentrated minds
in Brussels and Berlin towards action that would safeguard their
interests.  Ireland has benefited by
default rather than by design.

The important message that should not be lost on small EU
member states is this: you cannot assume that you are members of a caring
club…indeed should a small EU member state find itself in difficulty it is as
likely to be taken advantage of as assisted.  Merkel’s insistence on penal debt repayment
terms and Sarkosy’s nasty opportunistic intervention on corporate tax
exemplified what small EU states can expect when circumstances make them
vulnerable and weak.

This should concentrate minds in the capitals of the small
countries of the EU and reawaken concerns about a Germany that is once again
calling the shots by reverting to its bossy ways.

Unfortunately the lifeboat in which Ireland finds itself remains
under the control of the same crew: a less than coherent Troika:  the IMF, the EC B and the EU.  Were the IMF alone in charge the prospects of
a successful outcome would be quite promising, because many of Ireland’s economic
fundamentals are still strong.  The IMF
would wish to build on these. The IMF has a team of some 200 of the world’s
best economic minds with an impressive track record of successfully
resuscitating failed economies.  The other
two, the ECB and the EU lack the expertise or structures necessary to deal with
the European dilemma and come with all sorts of unhelpful political baggage.  IMF policies have been frustrated by the ECB
and the EU.   EU financial aid is
packaged in layers of politics; some directed to the wellbeing of the EU others
towards the interests of those states contributing to the rescue.  As a result when Brussels insisted that the
ECB should join with the IMF in directing rescues of member states the
political and the economic became seriously and unhelpfully intertwined.  With EU politics imposed on IMF economics the
prospect of an early successful EU or Irish economic recovery remains doubtful

In dealing with the two wild cards of the Troika: the EU and
the ECB Ireland should proceed in the knowledge that the EU and its
institutions are more likely to be moved by bargaining chips that could threaten
interests than by any spirit of altruism.

Berlin, having just completed the 90-year repayment of World
War reparation debts, has reason to recall that the Allied victors of WW11,
rather than keeping Germany on its knees by imposing punitive sanctions on all
its citizens, wisely did the reverse.  In
a remarkable sense of forgiveness and altruism major investment was made and
policies adopted, led by the US Marshall Aid programme, to rekindle and rebuild
the German economy. A devastated Germany was resuscitated and with guidance and
support emerged surprisingly quickly as a successful and strong economy. There
is good reason now to expect that Germany, which was so forgivingly fostered
towards recovery and growth, should now give generous leadership in Europe and
repay some of its moral debt, now that it is in a position to do so.

Yes, reparation debts were imposed on Germany to compensate
those who had suffered at its hands.  But
the arrangements for repayment of these debts were designed in such a way and
extended over such a long period that the burden of this debt did not endanger
economic recovery.

This altruism and concern for the economic recovery of post
war Germany contrasts sorely with the treatment meted out to Ireland last

Public opinion has been kind to Germany, but bitter memories
lie dormant that could readily be reawakened. Germany is starting to throw its
weight about again.  Not of course in a
military sense, fortunately, but in an economic and political sense.  Decades of fine leadership under Adenauer,
Brandt, Schmidt and Kohl left small nations in Europe pleased and confident
that Germany was repentant and would not again revert to form.  Germany’s external policies had regard for
the sensitivities of its fellow Europeans and the need for respect and
partnership.  The message is still
mouthed but the facts belie the intent. The nature of leadership under
chancellor Merkel, with the quisling-like support of French President Sarkozy,
now raises the old concerns.

Recent experience highlights the need for the small EU
states to form a stronger and more coordinated block within the EU; a block
willing to stand together and, when necessary, facedown major states. Ireland
could create some bargaining chips if it adopted a leadership role in efforts
to strengthen the partnership and build a strong block of small EU states.

Ireland could be
aided in doing so given its remarkable international diaspora.  It could also be active in stimulating its
friends in the US, Canada, Britain and Australia towards exercising muscle.  The potential of this approach was highlighted
by Minister Michael Noonan’s trip to Washington in June. It looked unlike a
coincidence that shortly after his return resident Van Rompuy rushed to Dublin
for discussions.

Beijing offers some potential also for strengthening our
hand.  China’s  global ambitions might be exploited by
Ireland.  China has made great inroads in
Africa and SE Asia by using its financial clout. Ireland could represent a
useful platform for China’s ambitions in Europe.  Ireland, as an English speaking country with
little international baggage, could prove an attractive EU beachhead.  Ireland’s debt burden might well be lightened
as part of a deal with China.   A special relationship with China could also
provide Ireland with preferential access to the Chinese market.  Since this market is now a key driver of
Germany’s export economy a special relationship there could open up interesting
leverage opportunities for Ireland.

Hopefully it will transpire that last Thursday marked an
important point where Germany decided to return to its post-war policies based on
reconciliation and constructive partnership.
But were this not so the small EU states have good reason to move in
active partnership.  Unpleasant dormant
memories combined with recent experiences should serve to galvanise these states
into action to ensure that Germany does not attempt to secure in Europe,
through its economic dominance, what it failed to impose through military

Sunday Business Post
24 July 2011




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