We have the wind in our sails but a new long term vision and plan is required

Brian Hayes MEP, member of the Economics & Monetary Affairs Committee of the European Parliament

 

One of the things that strikes me since my election to the European Parliament is the really positive view of Ireland by people outside of Ireland. You rarely get that from people living in Ireland. You certainly don’t get it in the domestic media.

Where I work people talk about Ireland as a country where we have made a success and confronted our challenges. Perception is everything in politics. A colleague of mine in the European Parliament, a man in his late seventies who regularly visited Ireland in the 1970s and 1980s, frequently remarks to me about how Ireland has developed by comparison to other member states of the EU. He once remarked to me how “Ireland had used the opportunity of EU membership so much better than others.”

Our story, both since joining the EU in the 1970s and today, is seen as a country internationally that has confronted adversity. If we look back over the past 50 years I think we can safely say that Ireland has been transformed, socially and economically.

 

A place of achievement and success
For the first 40 years after independence, Ireland remained closed to the world. Change began to come slowly in the 1960s. Joining the EU was central to that transformation – Ireland came out from under Britain’s skirt. What has followed has been real success, although it’s rarely recognised – real success over many decades like:

  • a very internationalised economy we have built with strong FDI business.
  • going from a labour market of 1 to 2 million – unprecedented – over 20 years.
  • where 60% of the age cohort go to further education – previously it was 20%.
  • where average pay is the 4th highest in EU and 25% higher than the average in the other 27 Member States; when we joined the EU it was 40% below the then average.
  • we have the second most progressive income tax system in the OECD – the top 10% pay 60% of all income tax and the top 1% pay 20%.
  • Ireland is in the top ten counties most developed according to the UN Human Development Index.

For whatever reason our politics and our public commentary gorge out on portraying Ireland as a failure. Ireland is constantly seen as a place of missed opportunity rather than a place of achievement and success.

Watching the election of Leo Varadkar as Taoiseach recently in the Dáil, from the safety of a screen in Brussels, I barely recognised my country. I have to say it was depressing. The great majority of speeches that day were negative, almost reckless in their negativity. It reminded me of a college debating society – a bit removed, almost unable to recognise any positive feature in the modern Irish economy.

As a country we are obsessed with developments on this island in politics and in the media. At one level you can understand that. I don’t remember in last year’s election the issue of Europe ever arising. Yet it’s central to our politics and the development of the country because of our membership of the Euro. At no stage during the FG leadership debates, was Europe ever raised to either of the candidates.

Now we are firstly asked to recognise that the wind is in our sail and we were asked to set out what our vision and more importantly our plan for the time ahead might be to achieve the new and eternal Jerusalem here in Ireland.

 

Plan for a changing Ireland
Some good news first. We are all going to live longer. Worried about not being here in beautiful Glenties in 10 years time – don’t worry. Our population will grow by one million over the next 30 years according to the CSO. I’m reliable informed that’s the equivalent of 12 full Croke Parks. So when you’re watching Dublin play this September, perhaps against Donegal, just think of that!

The even better news is that the current population of over 65s, over 650,000 people, is likely to be 1.4 million by 2050. And the over 85s, that will go from 150,000 to 500,000 people.

Lots of really big issues from housing to health care to pensions will have to be confronted by both population growth and the demographic changes to Ireland’s population base.

Enda Kenny once remarked that Ireland could become the best small country in the world to do business in. My vision for my country is that Ireland could become the best small country in the world in which to live – a country that could change ahead of time, a country that was genuinely a meritocratic society, a country that prepared for hard times, a country that valued every person and was a beacon internationally for the decent society and a bridge between old and new Europe. And the essence of the plan – a five point plan if you like – would be:

  1. The need for centre-ground politics.
  2. Ireland in a new relationship with the EU.
  3. Ireland a core country of the Eurozone.
  4. The relentless need to benchmark ourselves.
  5. Going global is good for Ireland.

 

  1. The Need for Centre Ground Politics

I’ve learnt a bit over recent years about new political systems especially in how the European Parliament works. And while politics is quite the same the world over – the good the bad and the ugly all in existence – our politics in recent years has become very toxic, polarised and extremely personalised.

In the European Parliament, you do get a sense that the issues are more important than the surrounding politics. That the process of gaining consensus, building the biggest majority you can and accommodating differences are as important as winning a majority. I don’t believe we can move forward as a country, even with the wind in our sail, unless we have a government that enjoys majority support in the Dáil. For whatever reason, it’s not in our political DNA to reach out and compromise – yet we need it now more than ever.

After the next election, what is really needed is a majority in the Dáil over a five-year period. The only logical centre ground government has to be FG/FF in a grand coalition for a 5-year term. I believe such a government could make the right choices for the next generation, sure in the knowledge that they would have a working majority in the Dáil. It works in other countries, it can work here. In the meantime it’s in the interest of centre ground politics that the current government lasts as long as it can and, from a Fine Gael perspective, it’s crucial that it does not take FF for granted.

 

  1. A new relationship with the EU

Brexit, a more optimistic view of the Eurozone and defeat for now of the hard right in some countries, provides a good backdrop for Europe right now. Suddenly the EU is not looking as sick as it did. As Europe comes back from the financial crisis – just like Ireland – I believe we need to pivot to Europe, that our attitude to Europe needs to change, that our politics needs to take the EU politics much more seriously. We are no longer net beneficiaries; we now contribute more than we receive. Just as we obtained over €57 billion in funds to develop economically, it is right that we contribute to other poorer member states. We are one of the oldest EU member states. We need to build new partnerships from the Baltics to the Benelux countries. We need to review our contribution to EU security while having a mature debate about our traditional policy on neutrality.

The EU is not the bogeyman that some populist factions in this country like to present. The EU is not perfect. Far from it. Enormous mistakes have been made, especially during the crisis. But it should not be scapegoated for mistakes that are essentially homegrown.

At last we are beginning to see the emergence of a stronger more pro-European leadership. Angela Merkel is the standout leader amongst the big Member States right now. But recently she was joined by Macron in France as a new Franco-German axis is beginning to re-emerge. From Mitterrand to Kohl to Schuman to Adenaeur – Europe was blessed in the past with leaders who could inspire the public with a message of unity. That message is badly needed now.

Our own difficulties around the collapse of the country in 2010/2011 have conveniently allowed many people to believe that it was all the EU’s fault, that the debt was imposed upon us to save German banks or that in some way we could have dodged the bailout had the EU intervened. All of that is economic and political fairytale. The reason Ireland entered a financial assistance programme was because our tax base collapsed, based on a big fat property bubble.  Europe didn’t guarantee the banks; we did.

Countries that blame other people for their problems make the same mistakes over and over again. Here again no one speaks for Europe.

 

  1. Making Ireland a core Eurozone country

Being part of the Eurozone core is something we should strive for. That means getting our debt down well below 60% of GDP – I think we should aim for 40% within the next 10 years. Yes our debt levels are very high. But a decade of sustained growth – averaging out at 3% – would make a great difference in reducing the actual debt and the cost of servicing debt.

As well, making Ireland part of the Eurozone core would really help to position the country for future investment opportunities. It also means slashing our deficit, getting to full employment and becoming more competitive in different sectors. But the key priority right now must be about getting to a balanced budget next year. What a remarkable achievement that would be!

What many commentators do not fully appreciate is that under the Fiscal rules, we will have reached our Medium Term Objective if we achieve this next year and then all the talk about the restrictiveness on fiscal space will fade away. By getting to a balanced budget you then have flexibility under the existing rules. Until we reach a balanced budget, the expenditure benchmark rule limits our spending levels.

 

  1. The need for benchmarking.

One of the advantages of the EU is the ready availability of data. There is literally information on everything so that you can compare how your country is doing on a range of issues.

In the future, what’s needed for Ireland is a relentless benchmarking exercise – comparing ourselves against what other similar sized EU countries are doing. They can also learn from us. How have Estonia got their digital platforms so right when it comes to accessing public services? What can the German model of traineeships teach us about options for post-leaving cert students? Can we learn from the reforms of pension policy that the Netherlands introduced ten years ago? We need to constantly benchmark.

We also must ensure that real growth in current expenditure should never exceed where we see real GDP growth in the economy. We should also make sure, in so far as possible, that increases in expenditure are not of the permanent variety. We should put aside as much as possible for the rainy day, preparing for the worst. And finally we need to respect the advice of the Fiscal Advisory Council.

 

  1. Going global is good for Ireland.

The one country in the EU that has gained most from globalisation is Ireland. Yes you can become fragile as the world economy dips, but the upside brings real prosperity. We have no fear in embracing globalisation. We are better educated and have an enormous FDI footprint which helps our trade and our connection to the rest of world. Look at our stats, we have:

•  9 out of the top 10 global ICT corporations;

•  13 out of the top 15 Global Medical Technology Companies;

•  more than 50% of the world’s leading financial services organisations;

•  9 out of the top 10 global software companies;

•  9 out of the top 10 global pharmaceutical companies.

In the 8 years since 2008, world trade has only increased by half the rate in comparison with the 8 years before. 90% of growth this year is not in the EU. Europe needs trade deals like TTIP and CETA – freeing up markets and opening up trade – as part of its comeback since the financial crisis. And Ireland is perfectly located as an English speaking bridge to the US to help Europe deliver on trade.

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