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Ireland: taking one for the team?


Monday 14 January 2013

I spent most of last week in Ireland, speaking to government ministers and officials who will shape the country's six-month presidency of the EU's Council of Ministers. Ireland is picking itself up after a torrid few years. It suffered a deep recession (real GDP fell by 10% between 2007 and 2010). Deficit and debt levels have soared (debt from 25% of GDP in 2007 to nearly 120% in 2012; the deficit is at 8% of GDP compared with a 3% eurozone target). Its banking sector experienced one of the worst collapses seen in the eurozone crisis and the way in which the government tried to prop its banks up has left it saddled with enormous debt.

 

But Ireland takes on the mantle of Council president with some confidence. The government believes that the worst is behind it and the country had received recognition – and ministers are only too happy to propagate the view – that Ireland has become a model for other countries for how to get through the crisis and come out the other side.

 

For ordinary men and women times are still tough after experiencing the EU's second highest rise in unemployment since 2007 (second only to Spain) and there's evidence that those without a job are staying out of work longer.

 

The perception in Ireland, and this is again shared by government ministers, is that the country was unfairly treated when it rushed to save its banking sector two years ago. (The government at the time was soundly beaten in a general election soon after.) The message is that Ireland helped save the eurozone's entire banking sector when it stopped its own banks collapsing. “Ireland took one for the team,” was an expression used by at least two ministers I heard from.

 

Now, in return, it wants to be given an easier ride to pay the bill. It owes the European Central Bank €28 billion for promissory notes – effectively IOUs – that Ireland issued to prop up Anglo Irish Bank. Ireland is due to pay €3bn back at the end of March but wants to reschedule its payments over a much longer period. Ireland also wants the eurozone's rescue fund, the European Stability Mechanism (ESM), to take on some of the government's debt it paid for Ireland's surviving banking sector. The IMF sounds supportive. Herman Van Rompuy and José Manuel Barroso, the presidents of the European Council and Commission, expressed their backing when they visited Dublin last week. The ECB, and for that matter Germany, are less willing to make concessions.

 

Making further progress economically is not the only issue on Ireland's agenda for the next six months. Its priorities include the single market, digital agenda, youth unemployment and helping to strike an agreement over the EU's 2014-2020 budget.

 

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