28 Jan 09 Eddie's Blog Global

Europe

The current economic crisis forces us to re-examine all the heretofore fixed points in our business and economic life.

As such it is a good thing.  An unexpected benefit!

Ireland is a member of the European Union.  In a Referendum on the Lisbon Treaty last year, the Irish people rejected the Treaty.

It is time to review what Europe has meant to Ireland in the past and what it means currently. We do this so that we can form a vision for Ireland either in or outside of the EU.

We joined Europe in 1973 as a predominantly agricultural economy.  Our membership of Europe allowed Ireland to participate in a very large market for our agricultural produce; a market which was characterised by a common agricultural policy.  Irish farming was subsidised. The transfers from Europe as part of the CAP for the past 36 years have amounted to no less than €40 billion (in real prices).  We got another €30 billion to modernise our economy and infrastructure.               .

A profound industrial revolution happened in the US in the 80’s in telephony, computer chips, personal computers, fibre optic communications, the world wide web and mobile telephony.

America could have proceeded to build the new manufacturing facilities anywhere in the world.  However if they built them outside of Europe they would have been subject to tariff barriers.  Many commentators spoke in terms of “fortress Europe” in the late 80’s. The world was familiar with Toshiba tape recorders being stripped down by the French to ensure compliance to French technical standards.  America needed a manufacturing hub in Europe. It examined each E.U. member state to see which would be the best place.  They concluded that, with a 10% tax rate on manufactured goods and a stable democratic English speaking Government that Ireland was the place to locate this manufacturing.

Over the ensuing decade 56 American multi-nationals invested in Ireland and created the Celtic Tiger.  Membership of the EU was the key reason for our greatest period of economic expansion.  We had stable English speaking government, and a 10% tax rate since 1958, with very little in the way of high economic growth.  Ireland has had great difficulty in planning and building infrastructure.  Albert Reynolds as Taoiseach recognised this fact.  In the early 90’s, he kick started the build of our modern infrastructure with a £10 billion grant from Europe.  Our roads, railways, ports, airports, sewage systems, water treatment plants were updated and modernised.  70 to 80% of all laws in Ireland emanate from Europe.  Ireland has seen its telecommunications system; its electricity system; its airlines opened up to competition because of a European Directive.  The EU has been responsible for the emergence of a generation of entrepreneurs, who could now create wealth in areas where only monopolies operated before competition exists to the extent that it does in Ireland only because of European intervention. 

Ireland’s currency is the Euro.   We share it in common with Germany, France, Spain,  the Netherlands and other EU economies.  It has been the most stable currency in the world since its inception.  It confers on Ireland the stability of the German economy.  Since we joined, our interest rates have been stable.  They are adjusted by the European Central Bank so as to minimise inflation.  The behaviour of the euro in the recent past has been solid in the face of great variations in other currencies.

And what of the future?

It is the judgement of 500m+ people that Europe needs a new underpinning Treaty to carry on its vision of a prosperous, peaceful, heterogeneous Europe.  Two key points in the Treaty are paramount.  The first is energy. The biggest single issue facing all the people of Europe in the short term is energy security.  Twice in the last three years, in January, Mr. Putin has turned off the natural gas supplies to Western Europe. Mr Putin did this when we still have a good supply of natural of our own.  Think of the power Russia will have when all North Sea, North Africa and all on shore European gas production will be finished by 2025. 

The EU, and in particular, the Commission, has had no real competence in the energy area and no power to make laws governing energy matters in the member states. The energy to power our homes and our economies is out there in the seas and ocean around Northern Europe and in the sun scorched areas of the South. No one country, not even Germany, can exploit these offshore resources by itself.  For one thing, Germany can claim jurisdiction over a small portion only of the northern European seas.  For another, getting steady power from wind requires the building of a large continental wide transmission grid.  Nor can the UK bring this great vision to fruition, even though it has access to large tracts of the North Sea and Atlantic.  The UK needs access to the big continental markets to justify the spend on the new energy source and to smooth out the variability that occurs to wind energy at any one offshore location.

If we have ever needed Europe in the past we need it more now. 

The Lisbon Treaty gives this power. 

It is only by acting in consort, i.e. all 27 states pooling their sovereignty to achieve energy independence, that we can effectively deal with the Russian or any other threat to our energy supplies. 27 nations have much more purchasing power than any single one.

The second reason why we need to be a strong and contributing member of the new Europe is for environmental reasons.  The biggest long term problem faced by Europe and the world is global warming.  There is now nothing that can be done to prevent an average global rise in temperature of 2 degrees.  This brings into question our very future as a species.  From some recently published figures it appears some 1,000,000 species will disappear by mid century due to global warming.

Human kind has never before existed in an atmosphere containing more than 280 parts per million of green house gasses.  We are currently at 450 and rising rapidly.  Europe has the greatest record on the planet of dealing with this issue.  Ireland needs to reassert its acceptance of the measures mandated in the latest Directive calling for 34% of electricity to be made from renewable sources by 2020.

The European Lisbon Treaty gives a concrete expression to these last two vital world issues in the person of the foreign policy co-ordinator.  Europe needs such a person to deal with Putin and with Obama and with Wen Jiabao. 

By pooling our sovereignties we create more freedom for each nation to flourish.  There has been an absence of freedom when war was a normal expectation for European citizenry. The EU dealt with this issue.  There was an absence of freedom for entrepreneurs to create wealth in the old monopoly dominated Europe.  The EU dealt with this issue.  There will be little freedom for the nations of Europe without secure long term sources of energy.  
We say “let freedom reign”.