From bailout to Brexit

The Dublin government sees its future with mainland Europe, not an insular UK, writes James Harvey

The self-congratulation and unbridled optimism of the Celtic Tiger came to an abrupt and chastening end during the global financial crisis of 2008. To prevent the collapse of Ireland’s banks, the Fianna Fáil government had guaranteed their debts in September of that year, but this failed to stabilise the situation and by September 2010 the cost of the guarantee had risen to €45 billion, pushing the state’s budget deficit up to the equivalent of around a third of GDP.1

In a policy model that was to be followed later in Greece and Portugal, the Irish government agreed an €85 billion rescue package with the European Commission, the European Central Bank and the International Monetary Fund. These three capitalist institutions, colloquially described as ‘the Troika’, hoped that this bailout would shore up the state’s deficit and prevent the Irish contagion undermining the wider European financial system. In return for the rescue package and in order to “restore market confidence in the Irish state and economy”, the government agreed a draconian four-year austerity programme of tax rises and public spending cuts.2

Despite widespread protests against austerity, and the electoral rout of Fianna Fáil in the 2011 general election, Irish capitalism remained firmly committed to the strategy. If anything, the bailout had reinforced the consensus amongst Fine Gael and Fianna Fáil politicians, and Irish economic commentators, that there was now no alternative to Irish membership of the euro zone and a strict adherence to the financial rectitude of European Union Ordoliberalismus.3 This commitment to the dominant orthodoxy was revealed by the striking unity shown by the capitalist parties and media during the referendum campaign, which was successful in ratifying the EU fiscal compact in 2012.4

Although the ratification of the compact was taken as an endorsement of the Fine Gael/Labour coalition’s EU-imposed austerity programme, this remained a period of considerable political and economic uncertainty for Irish capitalism. The rise of ‘anti-establishment’ parties and the collapse of Fianna Fáil, combined with wide-scale criticism of the pillars of Irish society in the Catholic church and the ‘business community’, posed something of an ideological challenge for the bourgeoisie and its political representatives.5 In an attempt to rebuild its authority and legitimacy, the Irish state drew on two key themes, which politicians and commentators increasingly conjoined in a revised national project for the 26 counties: viz the historical struggle for Irish independence, celebrated in the decade of centenaries, and contemporary Ireland’s place as a committed ‘European’ nation.6 Using the fashionable post-nationalist language of ‘re-imagining’ and ‘rebuilding’, official Ireland drew on these long-established elements to give their state a new coat of Euro blue paint to heighten the gloss of novelty - albeit one with a strong shade of green.7

This type of political rhetoric became particularly useful during the Brexit negotiations, when Irish politicians and commentators consciously drew on the involvement of European states, such as France and Germany, in the historical struggle for Irish independence.8 In sharp contrast to the reactionary imperial nostalgia of Brexit Britain, they argued, the Irish state’s national project could only be fulfilled by moving forward within the EU.9 Thus at moments of tension during these negotiations the very epitome of the new official progressive Ireland, Leo Varadkar - the gay, young, multicultural taoiseach and leader of the historically most anti-republican party, Fine Gael - could simultaneously wrap himself in both the green and blue flags that symbolised the new Ireland.

Hard choices?

If the Irish bourgeoisie’s attempt to reconfigure its national project around ‘Europe’ could be made to appear in line with the historical project of national independence, Britain’s withdrawal from the EU did pose some rather more serious economic problems for the 26 counties. Simon Coveney, the tánaiste (deputy prime minister) and minister for foreign affairs, argued this week that a no-deal Brexit would mean “a fundamental disruption to how the all-Ireland economy functions”, as well as putting stress on “the political systems that back it up ...”10

While much of the political focus was on the issue of the ‘hard border’ between Northern Ireland and the republic, perhaps the more important impact for the 26 counties’ economy was on bilateral trade as a whole between the United Kingdom and the Irish state. Although more than 50% of Irish exports now go to the EU (excluding Britain) and the share of Irish exports going to the UK as a whole declined from 50% in 1973 to 17% in 2016, this trade as a whole amounted to an estimated €60 billion, directly supporting 400,000 jobs in both jurisdictions, with perhaps the same figure indirectly linked through supply chains. Given that, in terms of goods and services, exports to the UK still amount to a fifth of the republic’s GDP, and that almost 30% of Irish imported merchandise comes from the UK, the extent and significance of this trading relationship for Ireland is clear.11

These direct economic interests exercised Irish politicians and policy-makers considerably when they commented during the Brexit referendum campaign.12 In particular, much attention was focused on east-west trade between Ireland and Britain rather than the impact of Brexit on the cross-border economy. In terms of this trade, whilst some 30% of Northern Irish exports go to the 26 counties, just 1% of the republic’s exports go north. Given that some 85% of the 26 counties’ total EU freight trade travels to continental Europe via British ports such as Holyhead, keeping this ‘land bridge’ open for uninterrupted and freely flowing exports remains a prime policy objective for the Dublin government.13

As Irish ministers have made plain since the 2016 British referendum, they, like the British ruling class, would prefer that Brexit did not happen and that normal service as usual for the two capitalist economies could be maintained in some form. However, given the hard choice between their old British neighbours and their new European friends, the Irish capitalists have decisively opted for a future in the bigger trading bloc, with its access to larger markets for Irish goods.14 The whole pattern of Irish economic development since the late 1950s has been in that direction: not only do the specific interests of the ‘native’ capitalists in agribusiness and niche manufacturing require that Ireland stays within the EU, but, much more importantly the multinationals in manufacturing and financial services with bases in the 26 counties require that the state remains as a low-tax entry point, with unimpeded access to these wider European markets.15

However, this alignment with the EU is not without its own tensions and potential pitfalls for Irish capitalism, especially given the increasing risk of a disorderly Brexit and the imposition of a hard border between the Irish Republic (as an EU member-state) and the United Kingdom (as a third country) after October 31.16 The backstop has a dual purpose: one is to protect Irish economic interests by preserving the reality of the ‘all-Ireland’ economy, especially in cross-border agribusiness. Thus, as Halloween approaches, urgent calls are being made by producers to prevent milk lakes in a post-Brexit Northern Ireland, whilst south of the border the diary industry is scaling back on Cheddar and into products deemed more palatable to the continental cheese consumer.17 The most important function of the backstop (along with its ostensible aim of preventing a ‘hard border’) for Dublin, however, remains political.

Despite some rather clumsy initial attempts by the British government to open up bilateral negotiations between the UK and Ireland on Brexit, the common front of the remaining 27 EU member-states has, so far - in public at least - remained solid.18 Germany, in particular, has said it “stands in full solidarity with Ireland over Brexit” and that, despite Boris Johnson’s incoherent bluster during the Tory leadership campaign, “the backstop will not be revisited”.19 For his part, Leo Varadkar has maintained his public position of rejecting “backstop alternatives”, technological solutions or further extensions beyond October 31 as a way around the ‘hard border’ question.20 The complexities of the backstop and the hard line taken in public by the EU 27 also serve to increase the possibility of a ‘Brexit in name only’ - an option favoured by the dominant sections of both the Irish and British capitalist classes.

Moreover, the backstop and the nature of the border have been linked to the unfinished business of the national question and the current stasis at Stormont. Despite the growing urgency of the frequently expressed concerns about the impact of Brexit on the Good Friday agreement and the ‘peace process’, these arguments are not really serious.21 Whilst the underlying political divisions and communal tensions remain within the Six Counties, Brexit will only expose these fault lines, not cause them. Claims that dissident republicans will use a remilitarised hard border as an excuse to mount attacks or that a return to “the bad old days of checkpoints and approved roads” will reignite communal violence are really wide of the mark.22 Similarly, ideas floated by unionists and some Tories that Varadkar is using the Brexit crisis and the backstop to prise the Six Counties away from the UK and reunite Ireland are likewise very far from the truth.23

What the Irish state’s response to Brexit has shown is a very different picture. Irish capitalism wants to concentrate on developing its specifically 26-county national project by benefitting economically from its membership of the EU. In an unstable world of large trading blocs and fast-changing geopolitics, Irish capitalism seeks certainty and security, but neither demands for Irish reunification nor Brexit offers these essential preconditions for profit and political stability.

While Dublin has made a clear choice about where its future lies by siding with its “gallant allies in Europe”, much remains uncertain - both about the future of the EU and how far Irish capitalism can succeed as a small state in an unstable period of global political and economic crisis

  1.  P Kirby Celtic Tiger in collapse: explaining the weaknesses of the Irish model Basingstoke 2010; D Donovan and AE Murphy The fall of the Celtic Tiger: Ireland and the euro debt crisis Oxford 2013.↩︎

  2.  www.irishtimes.com/business/economy/jean-claude-trichet-and-the-irish-bailout-a-timeline-1.1990882.↩︎

  3.  www.irishtimes.com/news/thousands-attend-austerity-protests-1.1254917; also www.theguardian.com/world/2011/feb/26/irish-election-result-enda-kenny. For a discussion on ordoliberalism and its impact on the EU, see A Cafruny and LS Talani, ‘German ordoliberalism and the future of the EU’ Critical Sociology April 2019: https://journals.sagepub.com/doi/10.1177/0896920519837334.↩︎

  4.  www.europarl.europa.eu/at-your-service/en/be-heard/eurobarometer/irish-referendum-on-fiscal-compact. This commitment was also revealed in the Irish state’s role in the Greek crisis of 2014-15. Irish politicians and civil servants working for the EU played a key part in implementing its austerity strategy in Greece: see www.irishtimes.com/business/economy/eu-mandarin-declan-costello-faces-greek-wrath-over-ultimatums-letter-1.2145787.↩︎

  5.  Electorally parties claiming to be on the left, such as Sinn Féin, or anti-system independents made significant gains in the 2011 election. Reports on clerical child sexual abuse and the treatment of women and girls in the Magdalene laundries, along with revelations about unsavoury connections between politicians and business people, financial corruption, tax avoidance and business incompetence during the Celtic Tiger period, all added to a sense of fundamental crisis for the Irish state and establishment. These related crises spawned a whole new genre of books and articles that bemoaned the situation and made various calls for change and renewal in Irish society and politics. For just two examples of these critiques see F O’Toole (ed) Up the republic: towards a new Ireland London 2012; and P Kirby and MP Murphy Towards a second republic: Irish politics after the Celtic Tiger London 2011.↩︎

  6.  For details about these official commemorations see www.decadeofcentenaries.com. For an analysis of the importance of history as a form of legitimation for the Irish state after the collapse of the Celtic Tiger see K Bean, ‘New roads to the rising: the Irish politics of commemoration since 1994’ in R Grayson and F McGarry (eds) Remembering 1916: the Easter Rising, the Somme and the politics of memory in Ireland Cambridge 2016.↩︎

  7.  K Hayward Irish nationalism and European integration: the official redefinition of the island of Ireland Manchester 2009.↩︎

  8.  Charlemagne, ‘A terrible passion is born’ The Economist March 23 2016.↩︎

  9.  F O’Toole Heroic failure: Brexit and the politics of pain London 2018; also www.irishtimes.com/opinion/nostalgia-for-empire-is-implicit-in-british-exceptionalism-1.3951210.↩︎

  10.  www.irishtimes.com/news/politics/no-deal-brexit-would-cause-major-disruption-for-irish-economy-coveney-1.3951171.↩︎

  11.  Details taken from the report of the House of Lords European Union Committee, December 12 2018: www.parliament.uk/brexit-uk-irish-relations.↩︎

  12.  www.theirishworld.com/dan-mulhall-brexit-british-irish-relations.↩︎

  13.  www.parliament.uk/brexit-uk-irish-relations; www.irishtimes.com/news/ireland/irish-news/brexit-poses-threat-to-irish-eu-trade-via-british-land-bridge-1.3692574.↩︎

  14.  www.foreignaffairs.gov.ie/news-and-media/press-releases/press-release-archive/2019/july/publication-of-brexit-contingency-action-plan-update-9-july-2019.php.↩︎

  15.  https://aib.ie/content/dam/aib/investorrelations/docs/economic-research/irish-economy/irish-economy-presentations/The%20Irish%20Economic%20Update%20February%202019.pdf.↩︎

  16.  www.ft.com/content/122a6272-5081-11e9-b401-8d9ef1626294: https://www.ft.com/content/7c73c3ec-a268-11e9-974c-ad1c6ab5efd1.↩︎

  17.  www.theguardian.com/politics/2019/apr/04/northern-ireland-faces-prospect-of-no-deal-brexit-milk-lake; www.irishtimes.com/news/ireland/irish-news/irish-dairy-industry-moves-out-of-cheddar-over-fears-of-no-deal-brexit-1.3943452.↩︎

  18.  T Connelly Brexit and Ireland: the dangers, the opportunities and the inside story London 2017.↩︎

  19.  www.theguardian.com/politics/2019/jul/04/germany-says-it-will-stand-in-full-solidarity-with-ireland-over-brexit.↩︎

  20.  www.irishexaminer.com/breakingnews/ireland/european-pms-will-be-reluctant-to-grant-another-brexit-extension-varadkar-says-935451.html.↩︎

  21.  www.businesspost.ie/opinion/dangerous-time-ireland-partly-fault-445620.↩︎

  22.  www.theguardian.com/world/2019/mar/06/brexit-is-a-huge-help-to-irish-republicanism-says-dissident-leader.↩︎

  23.  www.spectator.co.uk/2019/04/its-not-anti-irish-to-criticise-leo-varadkar; www.belfasttelegraph.co.uk/news/republic-of-ireland/leo-varadkar-very-much-opposed-to-a-united-ireland-referendum-35932315.html.↩︎