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Doing the right thing on Public Finances
Speech by Brian Hayes MEP to the annual dinner of the Chartered Institute of Management Accounting, Conrad Hotel, Dublin, Friday June 9th.
With €50 billion of Irish debt to be repaid in the next 3 years, the Fiscal Advisory Council is right to advise caution.
“Next week Ireland will have a new Taoiseach and a new Minister for Finance. It will be a big change, not just on the domestic political stage, but also internationally in terms of Ireland’s recognisable political figures.
“For the past six years Enda Kenny and Michael Noonan have been the international face of post-crisis Ireland. They worked as a tremendous double-act, especially in Brussels, and are highly regarded for what they achieved. Ireland is now in a much stronger position thanks to their calm and reassuring leadership. Michael Noonan is the second longest current Finance Minister and Enda Kenny the fourth longest serving Prime Minister. We owe them both a huge debt of gratitude.
“A new Taoiseach and a new Irish Finance Minister will have to hit the ground running. Eurozone politics is really a constant interplay between Prime Ministers and their Finance Ministers. An interplay between the European Council and the Eurogroup. The new diplomacy in Europe is essentially financial diplomacy. The Eurozone crisis not only created a new financial governance but also a new political dynamic. The relationship between heads of government and their finance ministers is absolutely crucial in signaling to the EU and the world what Ireland’s future direction is.
“We are just seven years away from the worst effects of the financial crisis. Ireland has come back strongly. Our economy is performing well above the EU average. On the jobs front – unemployment has fallen rapidly. Next year our budget will be balanced. Investment has returned and the banks are slowly returning to the private sector.
“My central message this evening – is that we cannot take for granted the recent turnaround in Ireland’s fortunes. We have to prepare for times when the economic conditions may not be so favourable. And at all times be prepared to guarantee that the public finance position is never compromised for short term political gain.
“We have learnt the hard way. Twice in my lifetime, I have seen a failure to correct the public finance position only to produce sustained economic hardship for our people. The economic history of Ireland is littered with missed opportunities since independence. In short, we must be cautious and prudent particularly given the twin dangers of a hard Brexit and a protectionist United States under Trump. In the same way that the benign and favourable conditions in the UK and the USA helped us emerge from the crisis, both key markets may well prove more difficult in the years ahead. We must be prepared for that.
“Yesterday’s election result in the UK could put our public finances in more potential jeopardy. There is added uncertainty for the whole Brexit process and the chances of no final agreement being reached between the UK and the EU have just increased.
“That’s why this week’s report from the Fiscal Advisory Council is so important. And of course it’s the task of the Fiscal Council to advise and the Government to decide. But it is equally important that the government has regard to what is being said.
“I see 5 golden rules that’s we should try to follow in relation to public expenditure.
– Growth in public expenditure must be lower then where real GDP growth is within the economy.
– Any increase in public expenditure should be heavily skewed towards once off capital investment and not towards reoccurring current expenditure.
– We should measure our public expenditure against similar sized EU economies and benchmark what we spend against what other member states spend.
– We need to put money aside each year, either through additional pension provision of a rainy day fund, for future liabilities.
– We need to make use of all EU opportunities for public expenditure use. We have not used the EIB’s investment plan to good effect so far. These opportunities offer huge potential for infrastructure investment.
“The mistakes of the past cannot be repeated. In ten years (1997-2007) public sector pay and pensions trebled from €7billion to over €20billion. It now makes up a third of all government expenditure and any increase in pay must be matched by not just improved efficiencies and work practices, but further reforming public sector pensions.
“There will always be pressures to spend more. Extra spending doesn’t necessarily mean better services for citizens. It’s a constant exercise of appraisal of projects and new financial commitments to arrive at the right result.
“The idea of a Rainy Day fund after 2019 where €1 billion would be saved away for an inevitable downturn – makes sense from a number of perspectives and sends out a strong message internationally. The question is whether we should wait until 2019. Would it make more sense to start saving now by building up a fund as a counter-cyclical measure? The other important thing to ensure is that we move away from within-year spending – we must stick to annual budgetary plans and resist temptation to splurge any windfall gains on current expenditure. Such gains should only be used for savings in a Rainy Day fund or to pay down our national debt.
“Whatever about expenditure one thing we need to be fully aware of is our national debt. Over the next three years – €50 billion of Ireland’s national debt has to be repaid. Effectively as a country we will be asking the NTMA to work on behalf of every Irish citizen in re financing that amount of debt at the best price available.
“Getting our debt levels down must be a priority for this and the next government. I fully agree with Michael Noonan in not spending any of the proceeds from the sale of AIB. We should part save it especially for future pension liability, and part write down the national debt. The markets are watching and will interpret the use of AIB proceeds for expenditure purposes as a warning sign from Ireland. That in itself could increase the cost of Irish debt – negating any advantage of selling AIB.
“Another area of concern has to be around sustaining taxation levels across all heads. For the PAYE sector which is now contributing €19 billion of all tax by comparison €12 billion ten years ago, there is some limited scope for reform. Already this year a small gap in expected tax revenue has emerged. While I’m confident that this position can be rectified – we have to be vigilante. Of greater concern is the fluctuating nature of the Irish Corporation tax take. What would happen if this tax Head under performed by €1billion or more? In the last three years, Corporation tax receipts increased from to €4 billion to €7 billion. It’s a position that we need to monitor closely, especially given the views of the new US administration when it comes to company tax reform there.
“The new Taoiseach and the new Finance Minister need our support in keeping the government on track and bedding down the recovery which is clearly underway. Yes, we face risks. Not of our making. And the EU in responding to Brexit has to and will help us deal with the fallout from Brexit. But we should not impose upon ourselves new risks, self-imposed risks. At this stage in the economic development of Ireland, what is needed is a strong hold on public finance. Doing the right thing now will pay dividends in the future. Let us not forget the legacy of stability and calm that Kenny and Noonan have left us.
Brexit-fueled nationalism will make us all poorer
Speech by Brian Hayes MEP at the Annual Conference of the British-Irish Chamber of Commerce – Clayton Hotel, Dublin Thursday 16th March 2017
Economic nationalism follows political nationalism – it’s as sure as night follows day. We have seen it in our common European history. We have seen it on these islands. And the great success of the EU has been to keep a lid on the ever present nationalism that has caused such chaos in the first half of the last century.
The drumbeat of nationalism is once again being heard across the continent. The Brexit referendum was in many respects a manifestation of English nationalism. There is a now a real possibility that the outworking of the Brexit referendum may result in the breakup of the United Kingdom. Scottish and English nationalism are now feeding off each other in a negative feedback loop.
The dangers of an awoken nationalism on these islands – be it English, Scottish or Irish nationalism – make the task of business stability and business confidence more difficult. Trade does not grow when countries are putting up barriers. In fact since 2008 the rate of world trade has grown by half its rate in the previous decade. As countries retreat from each other, we are all poorer.
Nationalism, English nationalism specifically, is the reason and the byproduct of Brexit. I said the day after Brexit that the breakup of Britain could happen in a decade as a consequence of this historic decision. The very existence of the UK is challenged because a majority of people in both Northern Ireland and Scotland find that English voters are dragging them out of the EU against their will.
I raise these issues because politics matters to the business environment. We take for granted at our peril the political stability that has been won here in Ireland or across the continent.
New fears are often old fears. And in my view fear – either real or perceived – is permeating the political environment right now on these islands. It is making politics very difficult right now and even undermines the very agreements that we all thought were water tight and irrevocable.
– Different parts of the UK are fearful about their future and their place in Europe.
– We here in the Republic are fearful about how Brexit will affect us. It seems that the consequences to this country were both ignored and dismissed when the UK made its decision.
– The British government, despite what they say, I would imagine are fearful as their stated strategy or single speech in response to Brexit is both contradictory and as yet, impossible to achieve.
– Other member states of the EU are also fearful, having weathered the worst of the financial crises, and at a time of emerging growth across the Eurozone, they now ask how Brexit will affect the EUs long anticipated recovery.
– And we are all fearful of what will follow the new Trump presidency in the United States as he has made it absolutely clear that his administration will be pursuing a nationalist, America First, economic agenda.
Brexit has unleashed political uncertainty and business have to weight up very carefully, how this new mood is going effect trade on these islands and across the EU.
It is in the DNA of Irish nationalism to see Britain’s difficulties as Ireland’s opportunities. There are some who cannot avoid the temptation for a little Brit bashing. We have seen political posturing and showboating from some on the issue of a border poll on Irish unity. Far from advancing the cause of Irish unity, such calls will only deepen divisions within Northern Ireland and make real reconciliation impossible.
In the years ahead Irish based businesses trading with the UK and with the EU will have to assess political developments within the UK. They will also have to make a judgement call on the progress of Brexit negotiations, while at the same time being fully aware of political developments within the EU. The upcoming elections in France and Germany also have the potential to deliver greater uncertainty; hopefully they will bring increased stability.
Amidst all this uncertainty, it’s the task of mainstream politicians and mainstream parties to calm things down.
We need to say a number of things and in so doing try to bring some order to these events. I see 6 fundamental principles that we need to accept going into these talks. Accepted on both sides.
- Brexit is going to happen and it’s all our responsibilities to make sure, in so far as possible, that the harmful effects are minimised as we work through the process
- None of us – neither the British nor the EU – can for one second countenance the possibility that these talks be allowed to fail. The worst outcome for Britain, Ireland and the rest of the EU is some cliff edge – we cannot allow that to happen.
- Ireland will remain in the EU and will over time become a core country in the Eurozone system. Our negotiation in the upcoming talks will be part of the EU 27 and we expect that our issues will become the responsibility of the EU negotiation team to deliver upon.
- These negotiations are not a sprint but a marathon and could well take between 6-10 years in duration. We need to be prepared for that time span.
- This process will outlive this and the next Dail and is something we will have to live with for a long time. It’s important from Ireland’s perspective that we have absolute continuity of policy from opposition to government. And there is a special responsibility on the government to include and involve the principal opposition parties. Irish politics is not good at this and has to change quickly so that a bi partisan approach is achieved no matter who is in government.
- The UK must never be regarded as some third country in its new relationship with the EU. It’s not like Brazil or Mexico, its importance to the financing and the economy of Europe must be recognised. We have to find a solution that works for the EU and the UK.
From Europe’s perspective I believe that the atmosphere can be improved for these talks if the EU makes it clear from the start about a number of things.
Firstly I believe that a transition phase has to happen. The British know it, the EU knows it. It is simply unimaginable that at the end of the divorce proceedings, which will hopefully be within 2 years, that there would be no transitional agreement for say at least 3 years. This more than anything else would give some certainly to business on these islands. If we were able to say that for the next 5 years, there would effectively be no change in either tariffs or indeed on regulations, it would help business to plan for the future. The EU should concede on this point early. Equally it would be important that a full discussion on the shape of the final agreement with the UK should happen during the transitional phase of the negotiation.
Secondly I believe it’s crucial that the EU make it clear – especially from Ireland’s perspective – that the divorce settlement, effectively the end of Article 50, can only come about by way of unanimity. The current procedure allows the EU Council in deciding on the agreement to decide by way of a strong qualified majority vote. The Council should make it clear from the start that ALL 27 member states have rights in this process and that ultimately all concerns have to be met. This from Ireland’s perspective is crucial in establishing that we cannot be rail road member states into accepting something that is not in our national interest.
And finally, it would help matters greatly if the EU and the UK do not get caught on an endless debate at the start of Ibsen process on outstanding budgetary commitments. Yes a liability exists and the UK must meet its obligations, but we cannot let the budget issues scupper the talks from the start.
But the UK also needs to heed serious advice – If they try to play chicken with the EU in these negotiations they will end up as roadkill. Greece tried to do this during their bailout talks and they learned their lesson the hard way. While the UK does have some cards to play, the EU clearly holds the upper hand in these talks. It is the EU that holds the keys to a transitional deal, single market access, customs union, equivalence and any sort of bespoke deal that the UK wants. If the UK wants to play brinkmanship, they will be facing a very stern opponent.
It’s time for the Central Bank and Dept. Finance to develop a ‘regulatory sandbox’ for new financial firms – Hayes
It’s time for the Central Bank and Dept. Finance to develop a ‘regulatory sandbox’ for new financial firms – Hayes
Speech by Brian Hayes MEP to the Banking and Payments Federation Ireland Conference on Digital Transformation in Financial Services – Thursday March 9th, The Marker Hotel, Dublin.
It’s was Charles Darwin who once said that those who can adapt are ultimately those that succeed in life. The same is true in financial services. Putting it simply – adaption is king. And adaption in how we organise our financial system; how we interface with customers and meet their needs will define those businesses who succeed and fail into the future.
We are living in the midst of the disruption age. When businesses come and go at lightning speed. From politics to business to investment, the pace of change is breath taking. Businesses that were once seen as impregnable world leaders can be taken down in weeks. Technology today makes such a difference in winning new markets and growing your business. It is the defining mark of business success or failure in today’s globalised world. This trend will multiply over the next decade, as it has in the last.
In Ireland, we need to embrace new financial technology (FinTech). We’ve done reasonably well so far but we’re still very far off reaching the full potential that this new digital finance world can offer. Look at the UK, look at Netherlands – they’ve created an innovative space where new financial technology solutions can flourish. The main reason for this is through the creation of ‘regulatory sandboxes’. A regulatory sandbox is a controlled environment set up by a regulator or central bank that allows businesses to test innovative products, services or business models in a live setting.
It is time that the Central Bank, in collaboration with the Department of Finance, developed a regulatory sandbox for Irish financial firms to test new and innovative products before they go to market. The great thing about a sandbox is that small businesses who are unauthorised can test their ideas before they go through the long authorisation process. The creation of a sandbox in Ireland would give us the confidence to take a giant leap into the FinTech world. We have a fantastic start-up culture, particularly in Dublin, that would welcome this with open arms.
A technology solution can make an idea become an instant success. Old models of distribution, in banking for instance or insurance, can profoundly change as branches and distribution networks become obsolete as more and more business migrates to online platforms. The cases of Ulster Bank and An Post just this week, highlight how quickly things are changing and how those in the area of financial services, public or private, have a responsibility to explain why these decisions are necessary.
But in all of this it is important that people are not left behind. Assumptions about the level of personal tech competence or knowledge, cannot be taken for granted. And of course assumptions about the level of national or regional connectivity, also need to be understood. Pretending that people should use online services without proper broadband is another dangerous assumption.
Equally the financial sector cannot underestimate the degree of trust that was sundered as a consequence of the financial crisis in Europe and especially in Ireland. Europe has helped Ireland in restoring financial stability both in our public finances and in our banks. That stability cannot be put at risk. As financial services move at warp speed into the digital age, with new technology and an enhanced product and service offering, underlying all of this must be financial stability. Trust in banking and trust in financial services must be earned.
At the heart of this disruption is the interface between finance and technology. In essence that’s what Fintech is. An enabler to improve the transfer of money across the financial system, in a reliable and cost effective way that brings added value to customers and the businesses that use the technology.
Over 140,000 people plus work in the finance and technology space in Ireland. We have lots of success in IT and lots of success in financial services. We have businesses from multinationals to micro-startups – all operating in this space. Ireland as a small country has an advantage to move quicker than others because of our size.
And that’s why we can become world leaders in the Fintech space. The talent pool of people is exceptional in Ireland. Getting out ahead of others and using our national advantages in IT, Finance, regulation, diaspora, exporting and strong business startup and entrepreneurial culture, are such an asset that policy makers need to harness.
The truth is that EU is catching up with many parts of the world where the Fintech revolution has been at the heart of economic development for a much longer period. In Singapore, Hong Kong, Israel and on the west coast of the United States, we have seen tremendous growth in recent years. And while Europe is catching up, across the EU the opportunity for a single digital market underlying the developments in Fintech need to be realised by the EU and by Member States. It has to be part of Europe’s economic comeback story since the financial crisis.
Ireland Must Pivot to Europe – HAYES
Fine Gael Dublin MEP speech to the Irish Society of Actuaries Annual Dinner 16th Feb 2017
Ireland has three core international relationships – with the UK, with the EU and with the United States. Yesterday, the Taoiseach set out Ireland’s strategic response to Brexit. He made it clear that Ireland will stay in the EU and stay in the Eurozone. To do otherwise would be a serious mistake. Now is to the time to pivot towards Europe and make it clear that Ireland’s future is within the EU.
I welcome the decision of the government to publish shortly, a Trade and Investment Strategy around the St Patrick’s Day celebrations. Trade negotiations will be a central aspect of the EU/UK Brexit negotiations. These negotiations will be of critical concern to Ireland.
Trade figures for 2016 published by the CSO this week make for some interesting reading. Goods exports are up by 4%, reaching a record €117 billion and Ireland has a trade surplus of €42.2 billion, which is very welcome indeed. It is worth looking in more detail at some of the trade figures.
In 2016 the value of goods exported to Great Britain was €13.3 billion – 11.4% of total exports. Exports to the rest of the EU amounted to €46.3 billion – 39.6% of total exports. The export figures also show that 49% of Irish exports are to non-EU countries; this figure reflects how international the modern Irish economy is.
The trend of exports in recent years also indicates that exports to Britain have remained static or even declined. In fact, exports to Britain declined by 4% in value in 2016. Though this might have been due to currency fluctuations. In contrast, exports to the rest of the EU have shown a steady increase since 2010, increasing by more than €6 billion per annum since 2010.
There are those who are arguing that Ireland should follow the UK into the unknown. I would like them to look at Ireland’s trade figures. I would also like them to look at the consequences for FDI in this country if we decided to leave the EU. I would like them to specifically address the issue of Ireland’s membership of the Eurozone and what might be the consequences of leaving the Eurozone.
Last year we saw the impact of the Brexit vote on the Euro/Sterling exchange on exports and cross border trading. The British have effectively seen a depreciation of about 15% in the value of sterling. As inflation takes hold in the UK with rising import costs – it is inevitable that the British economy will weaken. Ireland remains vulnerable to Euro/Sterling exchange risks. This risk will remain for the some years.
Part of the response to Brexit must be a pivot to Europe. This does not mean neglecting the British market – geography dictates that Ireland and Britain will always have the closest of trading links. Brexit does mean however, that Ireland must deepen our trade links and increase our exports to the rest of the EU. The new communities from EU countries will have an important role to play in developing trade links. In this regard, it is interesting to note that trade in goods between Poland and Ireland in 2016 was valued at almost €2 billion.
New markets in mainland Europe are particularly important for the Agri-Food sector, the tourist sector and Irish SMEs, all of which are heavily dependent on the British market. Bord Bia, Enterprise Ireland and Tourism Ireland have a huge responsibility to help and support these sectors to grow market share in mainland Europe. Even without the UK the EU will still be a Single Market of 450 million people – the largest and most prosperous single market in the world. SMEs in particular will need tax breaks, marketing and promotional support to break into European markets.
Younger people in all survey opinions are more pro-European. We have to improve language proficiency in our schools and colleges. Students need to be encouraged to work and live in non-English speaking countries. Our universities and third level colleges should be setting targets and supporting students to take up Erasmus exchange programmes. I also believe the government should introduce a new scholarship programme, jointly with business, wishing to sponsor young graduates willing to spend a year in mainland Europe on a mixture of work experience and job training placement.
CSO figures show that exports to the United States reached just over €30 billion in 2016, an increase of 12% on 2015. The dollar has been strong against the euro and is likely to remain so during 2017. Despite the tough talk of Tariffs and Protectionism from the Trump administration, a strong dollar provides great opportunities for Irish exporters of goods and services to a key export market. The passing of CETA this week in the European Parliament opens new opportunities with Canada.
Brexit will be challenging but it will also provide opportunities. It will be a marathon rather than a sprint. The outgoing US ambassador, Kevin O’Malley, made the point in his final speech that post Brexit Ireland will become even more attractive for investment. There will also be opportunities in the financial services sector and in higher education.
We are living in a period of political struggle and profound technological change. Success will depend on our capacity to respond to change, to be flexible and to identify opportunities. Nevertheless, let us remember this; the EU has transformed Europe and has transformed Ireland – economically, politically and socially. Ireland is now an open, dynamic, progressive country. Ireland is one of the top ten most developed countries in the world, according to the UN Human Development Index.
The EU is not just about economics; the EU is also about values. The EU value system is about democracy, freedom of the press, the rule of law, equality, workers’ rights and above all respect for the dignity of individuals in all their variety. These are values worth defending. Next month we will be celebrating the 60th anniversary of the Treaty of Rome.
In many respects, the EU has been a Peace Process for Europe. In the first half of the last century historians estimate that perhaps 80 million people died violently in Europe. Since 1950 apart from the violence in the former Yugoslavia, Europe has been relatively peaceful compared to previous generations.
But what happened in Yugoslavia in the early 90s and what happened in Ukraine more recently is a reminder to us of Europe’s violent past and a warning to us of what Europe could again be. Ireland is a small country with an economy integrated into an increasingly globalised world. Our future is with the EU – it is something we should proclaim openly and with pride.
The Irish State could pay Northern Ireland’s EU budget contribution in exchange for Associate EU membership – Hayes
The Irish State could pay Northern Ireland’s EU budget contribution in exchange for Associate EU membership – Hayes
Fine Gael MEP Brian Hayes MEP speech to the Institute of International and European Affairs in Brussels on the issue of challenges to Ireland from Brexit.
Predicting with any degree of certainly what the outcome of Brexit will be for Ireland, the UK or the EU is a very dangerous game. That is especially the case for politicians. However, I think we can all agree with Phillip Hammond, who recently described the upcoming negotiation between the UK and the EU as “a roller coaster ride”. That is putting it mildly.
The EU is a very different place now since June 23rd. We cannot pretend otherwise. Brexit is a major geo political event that cannot be under estimated. Its effects will be felt well beyond the boundary of the EU. The EU will shortly lose not just a Member state, but a big Member State. A Member State that is crucial for investment policy, a Member State that is a net contributor to the EU Budget and a Member State that is only one of five in the EU that has Triple A status. Well for now at least.
Brexit is the greatest foreign policy challenge that Ireland has faced since joining the EEC in 1973. We could only join the EEC when the UK joined in the early 1970s. And the question will inevitably be asked now – can we in Ireland remain in the EU now that the British are leaving?
It is an honest question that many people will ask and it deserves an honest answer. Those of us, who believe that Ireland should remain at the heart of the EU post Brexit and integrate further, need to be able to answer this question openly and honestly. People who ask this question should not be treated as “crazies”. It is a legitimate question to ask and have answered.
So let me set the scene for you. Uncertainty and instability are now present features of the political landscape. Currently Ireland is trying out New Politics for better or for worse. How long this government will last depends upon the principal opposition party in Ireland. What we can predict is that Brexit with its fallout and negotiation – will be a constant in Irish politics in the years to come and will definitely extend beyond the lifetime of this government and Dail.
The cohesion of the UK itself is being loudly questioned in Scotland. Indeed the ongoing standoff between Theresa May and Nicola Sturgeon will be one to watch. The EU is beset by internal and external challenges, which will stretch EU decision making, and the cohesion of the Union to its limits in the years ahead. The centre parties that created and sustained the EU – building from the centre its social market economy – are under assault from the right and from the left.
Britain needs to listen more
In politics language and tone matter. Some British politicians seem to have a tin ear when talking about the EU. The British PM, Theresa May, has said she relishes being called “a bloody difficult woman”. Liam Fox has referred to EU citizens currently working in the UK as “bargaining card” in future negotiations. The new Home Secretary, Amber Rudd, has spoken of requiring companies to keep a list of foreign workers. The head of the London Met has admitted there was a significant spike in reported hate and race related crimes post Brexit.
All of this has made the time since the June 23 a very difficult backdrop to the looming negotiation. Other Member States see all of this and are not impressed. A hard Brexit will be felt most in Ireland and in the U.K. There are no winners from a hard Brexit. More than 40% of British exports go to the EU and of course, Britain imports more than €200 billion per annum from the EU. Both sides have a clear interest in keeping open trade borders
Currency – The Big Risk
The single biggest risk to Ireland’s economic wellbeing is the Sterling euro exchange rates. This day last year, Sterling was worth €1.36 – today it is about €1.11. A year ago, the Euro was worth around 74p sterling – today’s it is about 90p. It is about a 20% depreciation in a year. These fluctuations, especially for an export country like Ireland, represent a major problem.
When the Euro goes higher than 85p Sterling, the Irish economy begins to hurt. We were here before in 2008. Then as the economic crisis unfolded, the ECB foolishly raised interest rates driving up the value the Euro. Late in 2008, the Euro almost reached parity with sterling.
Some of you will remember the immediate and very negative consequences for retailers In Dundalk and other border towns. Irish exporters to the UK took a big hit and tourist numbers from the UK showed a sharp decline during 2009 and took several years to recover.
The truth is that for Ireland emerging from the financial crash – we were greatly helped by a weak Euro against both the dollar and sterling. It was a great boost to our exporters. Also the fact that both the UK and the US were growing at a much stronger rate than other Eurozone economies was a crucial element in our economic come back.
Ireland has no control over exchange rates. We can however do two things. We need to put in place a mechanism where SMEs exporting to the UK can insure against extreme currency fluctuations. Exporters also need help in trying to increase exports by the SME sector to Eurozone countries – we should possible extend the existing tax break for businesses exporting to BRIC countries that was introduced in a previous budget. It is worth highlighting that while the UK is our biggest trading partner – our combined exports to the other 26 EU Member States is actually greater in volume and worth then it is to the UK. It is an indication of the road we have to travel.
Last week Charlie Flanagan, Minister for Foreign Affairs, said the Irish government would be seeking a special status for Northern Ireland in the context of the Brexit negotiation. The EU has played a central role, politically and financially in the developed of the peace process.
I believe finding a creative solution to what is a real Irish problem should be central to the negotiation. At some stage, the Irish government will need to spell out what they mean by a special status for Northern Ireland.
It was interesting to note the positive remarks from Jeffrey Donaldson, DUP MP, to Charlie Flanagan’s interview in the Irish Times. He said and I quote; “what we’re really looking for is a special deal for the island of Ireland which enables free movement of goods and people on the island of Ireland”. I regard this statement by Jeffery Donaldson was very significant in recognising the importance of the all Island economy.
Firstly, the Constitutional position of Northern Ireland is guaranteed under the principal of consent. It is the cornerstone of the Good Friday Agreement and represents the historic settlement of this generation. The only way the status of Northern Ireland can change is by a majority of the people wanting it to change. That is not evident from recent elections and those parties trying to use Brexit to demand a “Border Poll” are once again showboating and playing to the lowest common denominator.
Therefore, the constitutional position of the North is not in question, but the question remains how can Northern Ireland’s economy and the benefits of EU membership be obtained by its citizens if Britain now exits the EU via hard Brexit? If Britain exited without agreement on a customs union – a possible outcome – then the border would become a de facto reality again in terms of customs posts dotted along the border.
Taking up the challenge set by both Minister Flanagan and Jeffrey Donaldson – can a way be found to get a special deal for Northern Ireland?
Would it be possible that some type of EU Associate membership for Northern Ireland could exist along the lines of what Norway has negotiated? Membership of the EEA where possibly the Irish State could pay Northern Ireland’s EU budget contribution in lieu of Northern Ireland being able to trade on full or limited terms into the EU? Are not the arguments for Northern Ireland similar to the arguments for Gibraltar? Both land borders represent a major disruption to trade and the single market in a circumstance where the U.K is leaving the EU.
I believe that all options need to be on the table without questioning the fundamental and overarching reality that Northern Ireland is part of the UK and will be until a majority of its citizens decides otherwise. There are particular arguments about the need to provoke a genuine private sector economy in the case of Northern Ireland as it comes out of 40 years of conflict. These are European regional arguments that the EU fully understands.
Ireland’s role in negotiations
Negotiations on Brexit matter greatly. Of all the 27 remaining Members in the EU we have most to lose if negotiations go sour. There is €1.2 billion of trade between Ireland and the UK every week.
We have a common travel area between our two countries, which pre-date both our entry to the EEC. I think it is very important that Ireland have a senior official as part of the EU Commission negotiating team.
Our aim must be the most amicable divorce possible and Britain and the EU working co-operatively during and after negotiation. In this regard, Ireland needs to build alliances with other EU countries, which will have a particular interest in the Brexit negotiations – Denmark, the Netherlands, Sweden, and Portugal.
There will be opportunities for Ireland in this new environment. In any period of change, those who survive and prosper are those who best adapt to the changing external environment. I have already spoken about the attracting EU institutions now based in Britain, the European Banking Authority for example, to Ireland. I know for a fact that there is a steady stream of UK solicitors applying for membership of the Incorporated Law Society of Ireland. Other British professional wishing to function in the EU post Brexit may also be looking at membership of Irish regulatory and professional bodies.
And between 5 and 6 million British people are entitled to an Irish passport. After the referendum passport applications from the U.K have surged. If Ireland is to succeed in the challenging times ahead it must remain an open, welcoming, competitive country for FDI and international talent.
I also think we need as a country to revive our 1970s love affair with Europe. We need to bring some sparkle back into the relationship. We have lost a lot of political capital in Europe in recent years, especially recently over the Apple case. There is a lot of fence mending and alliance building to be done by Ireland at EU level.
I think Irish public opinion has also been negatively influenced by almost three decades of vicious anti-EU coverage in some sections of the British media. Membership of the EU has been transformational for Ireland, the Eurozone is our currency, and the EU is our Union. Our future wellbeing is intimately tied to the future of the EU.
Speech by Brian Hayes MEP to the Merriman Summer School Ennis Co Clare – Thursday July 30th 2016
Who dares to speak for Europe?
Looking at the fallout from the British EU referendum last week, I am reminded of the children’s nursery rhyme Humpty Dumpty. Who or how long will it take to put Europe back together again after Brexit is now the central question in European politics.
On June 5th at an investment conference in Paris, Daniel Kahneman, the 82 year old Israeli Nobel Laureate for behavioural economics, made some very interesting observations on the British referendum, then less than three weeks away.
He warned that British voters were in danger of succumbing to impulsive gut feelings and irrational reflexes in the campaign, with little regard for the enormous consequences down the road. He went on to say that the referendum debate was being driven by a destructive psychological process, one that could lead to a grave misjudgment and a downward spiral for British society.
One week after Brexit, much of his prophecy seems to have come true. The decision by Britain to leave the EU was in the first instance an act of self-mutilation. Reactions to the decision were felt first in currency exchanges and stock markets. Sterling continues to fluctuate wildly, Britain has lost its Triple A rating and there has been an enormous destruction of asset wealth. The Irish stock market has been the hardest hit in the backwash. The sale of government shareholding in Irish banks is now well and truly off the agenda.
We have crossed a bridge into the unknown. The consequences will play themselves out over the time ahead. There are no guarantees about the final destination.
Political consequences of the decision to leave followed immediately and the damage is obvious. A British PM gone, the British European commissioner gone, the Conservative Party now engaged in a divisive leadership campaign, the British Labour Party imploding, Britain now deeply divided in so many ways. One of the few adults around appears to be Nicola Sturgeon in Scotland. The British state itself is now at risk of disintegrating. And by the way, in case you haven’t noticed, England is out of the Euros!
Britain is diminished and the EU damaged. Britain’s friends and allies are disappointed and dismayed; the enemies of Britain and of Europe will have been celebrating last Friday. The hard men in the Kremlin were toasting Nigel Farage on Friday; populist parties of the right and left will have been energised and the dangerous forces of racism, nationalism and irrationality are gathering momentum all across Europe.
Our world has suddenly become a lot more fragile and considerably more dangerous.
The British political system and the British media must shoulder responsibility for this shambles.
For more than 30 years now the Conservative Party has pursued an anti-EU agenda. It was always a case of us against them. The British Labour Party has also been deeply conflicted on the EU. Apart from the SNP in Scotland, only the Liberal Democrats Party was a strong voice for Europe and it is now a marginal political force in Britain.
The anti-EU agenda in Britain has been supported for decades by a vicious and sustained campaign of sneering, un-truths, lies and vitriol in large sections of the British media. As the good book says – “you reap what you sow”
The Remain campaign was never a positive campaign for the EU. David Cameron admitted that he found the EU frustrating. His support for Europe and that of others on the Remain side was never enthusiastic. Add into the mix a large measure of anti-immigrant sentiment and it is surprising at all that the remain side got to 48%.
Ireland has been one of the big beneficiaries of the European Union. When we joined the then EEC in 1973 Ireland was still a relatively under-developed country. Our membership of the EU has transformed this country.
Over thirty years we have doubled our labour force – from one to two million people at work. Over €53 billion was received in net payments to this country. We now have an internationalised economy, from pharma to technology to financial services. In 1973 our average pay was one half what it was across the other Member States of the EEC, now it is 25% more than the EU average. We have the highest proportion of young people in third level education of any Member State of the EU. This year we became a net contributor to the EU budget – an amazing turnaround for what was once a poor country.
The EU is not about handouts. It is about a hand up. It is about countries taking the opportunity to improve themselves. To trade into a market of 500 million people across Europe.
No country has used the opportunity of the EU to develop its potential and grow its self-confidence better then Ireland. As a small country we have been transformed. The EU didn’t do it for us; we did it ourselves. But without the EU we would not have made the leap forward. The EU greatly helped our ability to move from under the skirt of Britain, to compete on the world stage, to diversify and prosper as a modern economy.
My essential point this evening is for Ireland to learn from the lesson of Brexit. We must stop taking Europe for granted. We must stop talking Europe down. We must stop this them and us attitude which effectively blames the EU for things that go wrong and ignores the positives that come from EU membership.
My question is who dares to speak for the EU and who defends its values here in Ireland?
The EU is not the bogeyman that some populist factions in this country like to present. The EU is not perfect. Far from it. Enormous mistakes have been made, especially in the run up and aftermath of the financial crisis. Its way of working is maddening at times. But the current aggressive and negative commentary on the EU in this country, represents the type of scapegoating that is such a common trait of the most evil form of recent European political history.
We need the learn the lesson from the relentless negative coverage of the EU in the UK and how that poisonous backdrop framed much of the debate.
We take the peace of Europe for granted at our peril. In the first half of the last century 80 million people died in Europe. On this day one hundred years ago the Battle of the Somme began, resulting in more than one million casualties. From the ashes of World War 2 and under the security umbrella of the United States a new Europe began to emerge – a democratic, peaceful and prosperous Europe. The EU was also there when the Berlin Wall fell and communism collapsed. At each step along the road towards peace on this island, the EU was there. Europe is essentially a peace project still under construction, but it cannot be taken for granted.
Europe badly needs good leadership. It misses having a strong Franco/German axis. Angela Merkel is the only standout leader amongst the big Member States right now. There is no Mitterrand and Kohl partnership as in previous decades. Europe needs the emergence of a Schuman or an Adenaeur – leaders who set out a vision of what Europe could become, leaders who can inspire the public with a message of unity.
Our own difficulties around the collapse of the country in 2010/2011 have conveniently allowed many people to believe that it was all the EU’s fault. That our problems were in some way not homegrown. We are also prone to a far bit of euro bashing in Ireland. That the debt was imposed upon us to save German banks or that in some way we could have dodged the bailout had the EU intervened. All of that is economic and political fairytale.
Europe made some very big mistakes in its response to the financial crisis. A Banking Union had to be put together at breakneck speed. We had no mechanism for bail-in bank resolution. The banks were not supervised at an EU level and the regulators failed miserably.
But the reason Ireland entered a financial assistance programme was because our tax base collapsed, based on a big fat property bubble. Europe didn’t guarantee the banks; we did.
Could the ECB have done more, much more, on allowing us to burn some senior debt? Yes of course they could. But that was small by comparison to the decision to guarantee the banks. The great great majority of our debt has nothing to do with the banks. Our debt massively spiked to keep public services opened and public servants paid.
We have it again on water. Europe is being blamed. As if we didn’t sign off on the Water Framework Directive or come to an agreement with Europe on the derogation that followed.
Countries that blame other people for their problems make the same mistakes over and over again. Here again no one speaks for Europe.
Criticising, pulling down, destroying is the easy bit. Working to find solutions, building a better future for all the citizens of Europe; that is the hard bit. What is so maddening about Brexit right now is that it is a total distraction from the jobs, investment and growth agenda, which should be the exclusive priority of all politicians in this post-crisis Europe. Instead we will face years of uncertainly and speculation.
The Taoiseach and the Irish government have made the case since last weekend that Britain need some time to decide what they want to do. Their options are limited. They want to be part of the single market without paying for it. But that a la carte option is not going to be on offer.
While they need some time before invoking article 50, I’m convinced that the EU will force the pace of the negotiation after that. Ireland has a crucial role to play in helping the process and hopefully trying to mend fences. Time and political change within the UK may well allow this entire issue to be reviewed when the full consequences of this decision are clearer.
The quality of life and the freedoms which Europeans now enjoy were not magicked into existence. We must be fully aware that powerful forces of disintegration are mobilising and gathering support all across Europe. We must not forget that the European Union is our Union, the Euro is our currency. Both are worth promoting. Both are worth defending.
Having come through the worst economic crisis in the history of the state Ireland may be about to face another economic and political challenge of arguable major proportions. The upcoming Brexit vote in the UK represents a real danger to our future economic wellbeing. As Klaus Regling, head of the European Financial Stability Fund said recently in Brussels – Brexit would impact on Ireland more than any other EU country. This week the IMF took to the stage and warned of severe economic damage for Europe and indeed for Britain.
In politics it’s always better to plan for the worst outcome. Anything that can go wrong, generally speaking does go wrong. The recent general election campaign by my own party being a case in point.
Just ten weeks from today Britain may be on the way out of the European Union. Recent opinion polls are indicating that the Leave and Remain sides are neck and neck. The polls also indicate that the Leave side is gaining momentum.
In a marvelous interview with Nigel Farage in last weekend’s edition of the Financial Times, Henry Mance described his lunch with the UKIP leader as both informative and liquid. They had 4 pints, a bottle of Chablis and two large ports, all before 4pm. Clearly Mr. Farage and the LEAVE campaign are getting confident – they seem to be celebrating already.
As we know from our own experience, referendums are often used as a mechanism to express general dissatisfaction with a government. What politicians, on both sides of the Irish Sea constantly underestimate is the impact of disruptive politics. If ever there was an issue that encourages this new phenomenon it must surely be Brexit.
I don’t want to comment in detail on British politics but the following facts are evident.
The present Conservative government has struggled with difficult issues since the beginning of the year and the authority of the British PM David Cameron has been somewhat weakened by recent events.
It is also a fact that the Labour Party leader Jeremy Corbyn, while he publicly supports the Remain campaign, comes from a tradition within the Labour Party which is less than enthusiastic about the EU.
I want to bring to your attention a certain irony in all of this. In this year, the centenary of the 1916 Rising – the kind of thinking which motivated the leaders in 1916 is now motivating many British and particularly English people 100 years later. Ideas such as; breaking or separating from the connection with Europe, restoring national sovereignty, ourselves alone.
A further irony is that Sinn Fein which campaigned against every EU referendum in the Republic is now campaigning in Northern Ireland with a British Conservative government on the Remain side of the debate. Sinn Fein is no longer Euro Sceptic but rather Euro Critical, or so we are told.
And of course Britain’s island status, its history of Empire and Commonwealth and of course two World Wars have meant that Britain’s relationship with the EU has always been a little tetchy and uneasy.
I’ve just finished reading Boris Johnson’s excellent book on Churchill, where even Johnson, now a confirmed “outer”, finds it difficult to ignore Churchill’s early support for the idea of a United States of Europe. Johnson, who himself has a lot riding on this result, brilliantly sidesteps criticising his hero but rather blames Atlee’s government in refusing to shape post war Europe by joining when they Britain had the chance. “Churchill would have stopped the early demand for an EU institutional empire,” Johnson tells us. I wonder indeed?
I think it was Ambassador Chilcott who referred earlier this year to the difference in understanding between Britain and the other countries on the nature of the EU project.
For Britain the EU is more about the transactional; it is about trade and opening up markets. For many other countries in Europe the EU is more about being transformational; for those countries the EU is primarily a political project, largely shaped by historical reasons.
The eastern accession states needed the EU to complete the move from Soviet domination towards democracy. Spain, Italy Portugal and Greece needed the EU to bookend the period of military dictatorship. Ireland needed the EU to come out from under the skirt of our nearest big neighbour. For Britain, whose institutions were totally intact after the war, not disgraced by the rise of fascism as other large states in Europe had been, the question was and largely remains, why do they need this thing called Europe.
Ireland and Britain
Ireland has three key international relationships – with Britain, the EU and the US. Geography and history dictates that Ireland’s relationship with Britain will always be of primary importance.
Membership of the EU has certainly been transformational for Ireland. For more than 40 years Ireland’s membership of the EU has been critical to our economic and social development.
We joined with the U.K, because we couldn’t have joined without them. The question must now be asked honestly; were they to leave now, could we stay in the EU without them? This is not some academic question. It will have to be faced in a post-Brexit environment.
I’m satisfied that we could and should remain in the EU without Britain. I’m satisfied that’s it’s in Ireland’s national interest to remain. But most definitely we would need a new agreement with the EU, post-Brexit. We would also need a new agreement with the U.K.
The biggest loss for Ireland from Brexit would not just be loss of our biggest trading partner, but the loss of a big country that we rely on for support in helping to fight our corner. Britain has an economy like ours. We are both exporting economies. We need Britain’s view of the economy to be foremost in designing a competitive and forward looking EU.
Preparing for Brexit
Since the election the Irish political system has engaged in an extended period of government formation. There is now an urgent need to put in place a stable government to prepare for the real prospect of Britain leaving the EU.
Failure to prepare adequately for such an eventuality would be serious dereliction of duty by all Irish politicians. There is a real danger that the present protracted negotiations on the formation of a government are distracting attention from the bigger danger ahead.
A British decision to leave the EU will be a profoundly disruptive economic and political event – for the EU, for Britain and for Ireland. We urgently need to prepare for that outcome. As Roy Keane famously said – “fail to prepare, prepare to fail”.
Ireland’s decision to join the Eurozone without Britain has left us vulnerable to negative currency fluctuations involving our single most important trading partner. The immediate danger to Ireland is the euro/sterling exchange rate. The very favourable exchange rate in recent years has been an important element in the Ireland’s economic recovery.
At the beginning of November last year the euro was trading at 70p sterling; this week it is trading close to 80p. If Britain decides to leave the EU currency traders are predicting parity between the sterling and euro by the end of this year. Some are even predicting sterling to fall below parity with the euro.
Should this happen there would be extremely negative consequences for Irish exports to Britain. The competitiveness of the important tourist sector will also be hit badly by a big fall in the value of sterling; the British segment accounts for 40% of the Irish tourist market.
After more than 40 years a member, divorce proceedings between Britain and the EU will be protracted, complex and very messy. We must not allow Ireland to be a victim of the separation negotiations that would follow. In effect Ireland will require a new agreement with both the EU and Britain in key areas, so as to ensure that we are not disadvantaged. That will be very difficult to envisage, but we badly need to think about what that deal might be and what red line issues we require.
At this stage I can think of at least 6 red line issues:
- Given the level of Irish exports to Britain in goods and services in 2015 terms is over €35billion how could we allow Europe to impose new restrictions on our trade where Britain is no longer governed by such restriction. Would we have an opt-out on EU legislation which could create new barriers to our biggest market?
- On financial services – currently worth to Ireland about 8% of GDP- how could we accept a situation where the City of London was given a free pass on EU legislation to the disadvantage of financial services in Dublin?
- On border controls, even though we are outside of the Schengen Agreement and have a common area of travel with the U.K., the idea as some have suggested that passport controls along the border simply cannot be allowed to happen. However there must be the closest possible co-operation between British and Irish security services to assuage Britain’s concerns about illegal migrants entering Britain through Ireland post Brexit?
- On energy – we have an all-island electricity market with inter connectors north/south and east/west: how would that emerging energy market be structured with the prospect of additional EU tariffs?
- Would the UK be subject to the EU greenhouse gas emission targets? If we are, with the knock-on effect it has for Irish agriculture and food production, how could we withstand additional cost to our government or industry?
- If Britain leaves the EU, will the EU be obliged to continue funding the Peace Funding package for Northern Ireland?
I raise these issues not to provoke fear but simply to start a genuine debate about what we need from all of this. We are told that contingency plans are in place. Frankly I’m not convinced that any serious contingency planning is underway. Nor do I believe that we have a plan for the potential negotiation. We need a strategy post-Brexit and the sooner that happens the better.
The truth is that the risks associated with a protracted Brexit negotiation are immense for Ireland. There are also opportunities, of that I am sure, but the last thing that post crises Ireland needs right now is more doubt and uncertainly.
I hope I’m wrong about Brexit. I hope that none of this comes to pass. But we do need to think long and hard about what potentially lies ahead and how we might deal with it. We have as they say – considerable skin in the game.
And while I believe the great majority of Irish people want Britain to remain in the EU, we cannot determine the outcome. That’s why a serious assessment of what we might need post Brexit should now take place. In my view it’s the first priority for whatever new government is formed.
The decision on June 23rd is of course one for the British people. On June 23rd Britain will have a date with destiny. A decision by Britain to leave the EU will send shock waves all across Europe and around the world. The fallout for Ireland will be severe. We may hope for the best but we need to prepare for the worst.