Ireland's position in Europe: between a rock and a hard place


Taoiseach Enda Kenny addresses a news conference in Brussels last Friday night 

The deal done last week between the countries of Europe to save the euro means that Ireland, by accident, finds itself in a difficult position.  We're between a rock and a hard place.

Or between the devil and the deep blue sea, the devil being the U.K. and the deep blue sea being Europe.
It's a critical juncture for us, one fraught with danger.  Uniquely among all the EU countries, the deal raises a fundamental question for Ireland because of our close ties with the U.K., the only one of the 27-nation European Union countries to veto the new agreement.

The British refusal to agree to the deal and its growing isolation from the rest of Europe as a result poses a real dilemma for us. No other country in the EU is as dependent on Britain as Ireland.
We share a border and a language, over a million of our people live in Britain and have free movement back and forth.

Britain is our biggest trading partner in Europe. We have broadly similar positions on economics, finance, regulation and many other issues that are high on the European agenda these days and, of course, for years our old currency, the punt, was the poor relation of sterling.

The only major difference between us in recent years was our decision to join the euro and Britain's decision to keep the pound and stay outside the eurozone.

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But even with that, we have held common positions on many of the questions facing Europe, and we could always rely on each other for support.  Even when we didn't agree we would consult each other.  Britain may have been the devil in the past, the old enemy, but these days there is a special relationship between us.

Like us, Britain is an open, trading economy which opposes too much regulation because it strangles business.
In contrast, the two big European beasts, France and Germany, are more closed economies, with lots of regulation.  They are also strongly in favor of tax harmonization across Europe, which both Britain and Ireland oppose.

In our case, one reason is our 12.5% corporation tax rate which is a critical attraction for foreign companies setting up here and which French President Nicolas Sarkozy wants to end.

In Britain's case, they strongly oppose tax harmonization and similar goals because they see them as steps towards fiscal convergence and eventual fiscal union which they believe would undermine Britain's success as an economy.  In particular they oppose the FTT (Financial Transactions Tax) which is part of the deal and is to apply across Europe and which Britain believes would damage London's position as a global financial center.

That was the immediate reason why British Prime Minister David Cameron used his veto in Brussels last week, although there were many other reasons. The differences were really more about the vision of a future Europe rather than a single issue.

The effect, however, is that Britain is now more estranged than ever from the European Union, where it has always been seen as a luke warm member.  

So Britain's semi-detachment from Europe as a consequence of their veto last week is not good news for us.   Britain has been a leading member of the 27-nation EU, even though it had stayed outside the 17-nation eurozone, and its further isolation from Europe poses a big question for us.

Do we remain as a fully involved and committed member of the EU and the eurozone?  Or do we detach ourselves to some extent and stay close to Britain?

The answer, virtually unanimous among the experts here, is that we must stick with Europe.  But the same experts are also pointing out how the semi-detachment of Britain is going to make life much more awkward for us in various ways in the future.