Travelling and Arriving. Brexit Collateral Damage

EU UJ Flag

The Brexit debate seems mired in dates and deadlines. Progress and attention span  is incremental with every week seeming to be all important and then fading into memory. Red lines do little more than lose their colour.

In Ireland it is never far from centre stage but even now fatigue and an October deadline have succeeded in taking it  off the front pages.

The relentless focus on dates and parliamentary procedures robs us of the opportunity to consider what type of environment the process will actually lead us to – not in terms of trade or tariffs but quite simply in how we get on with each other, the UK, Ireland and the EU.

What also doesn’t get a lot of attention is how Ireland will fare in an EU without the UK and how Ireland’s relationship in the round with its most important neighbour will develop.

For both of these questions there have been developments in recent weeks which should rule out any complacency.

The Republic of Ireland is pro EU. Membership of the EU gets an 85% approval rating in Ireland compared to a 62% figure from the EU 28 as a whole. This view has been long held and well embedded.

Ireland’s relationships with the UK are equally deep (and complex!). Putting history to one side, in purely commercial terms, the UK is our second largest export market taking 12% of our exports and when it comes to food and drink exports alone, this goes up to 40%. When you consider the prospects of leaving a trading bloc against the backdrop of those sort of numbers you can understand why it has been headline news for three years.

That our relationships both with the UK and EU will change is a given, but the actual process as we’ve seen it so far highlights some of the risks around that change and the nature of the relationship into the future.

Regarding Ireland and the UK, there has been outstanding progress on the quality of the relationship over the past ten years. Can that pace be maintained? It’s clear that the backstop has been a major fault-line in the negotiation landscape in the past 12 months. Generally there has been acceptance on the UK side of the need to honour commitments in the Good Friday agreement. However as progress stalled, we have seen lesser commitment from some of the leading Brexit proponents. We have also seen a degree of negative reporting  in the UK media. This led to the very unusual event in the first week of April of the Irish ambassador to the UK writing an open letter complaining about “snide and hostile” remarks in sections of the UK press. This is not a usual avenue for a diplomat to pursue and underlines the gravity of the situation. The Irish government had been fully appraised of the diplomatic action in advance. The key risk here of course is that we see more of this and some roll-back in what has become a very healthy relationship.

And Ireland is facing changes on other fronts. An EU without the UK will be a new experience for Ireland as both joined together in 1973.

And this is shaping up to be quite a different EU.

Even if the leader of the Italian Northern League, Matteo Salvini’s proposed alliance in the European parliament of AfD from Germany  and Marine Le Pen’s National Rally in France doesn’t come to fruition, this could be quite a fractious parliament, and the radical right may make some gains in May’s elections. Also with the UK leaving, France and Germany on their own become very close to achieving a blocking minority. Does the nature or tone of the assembly change without UK presence? As for the Council, research by Goldman Sachs in late 2016 pointed out that the UK had been the most “out-voted” member state in the previous 12 years. Also France is better at forming coalitions than Germany. What is clear is that Ireland will have lost a hugely influential neighbour with a common language and often common view point.

On the question of the controversial backstop, there has been reasonably wide-spread support across the EU. While we are still not clear how it will be resolved in the near term, it is also possible to see it re-emerging in three or four years’ time. Could Ireland count on the same degree of support in a future round of talks or has all the political capital been spent?

Recall in January this year, Mr. Czaputowicz, the Polish Foreign Minister, suggested a time limited backstop in order to move the talks along.  So far this has been the only meaningful sign of break-down in consensus and cohesion. However looking forward, the dynamics within the EU and lack of appetite for another round of negotiations may overwhelm principles. Support for a long term backstop across the EU27 cannot be taken for granted.

Europe still has an array of issues to deal with – immigration, overall debt levels, US trade and a sluggish economic cycle, etc. – all of which will require a decisive and cohesive response.

We run the risk of being dazzled by dates and deadlines in this Brexit odyssey. The journey as much as the destination is critical. How we actually get there, the language used, the tone of the debate, and ultimately how well we get on with each other, may matter just as much for the long term health of Europe overall.

Maybe that’s the real risk in Brexit.

Published by Eugene Kiernan

Thoughts, opinions, musings (whatever they might be) about investing, financial markets and the ordinary everyday folk who inhabit that arena

Leave a comment