How is brexit going to affect Ireland?

[Spinflight]

Given that all sides appear to be nicely committed to a frictionless border, even if the EU will face some problems with its existing treaties, what of the other effects?

For instance will Ireland join the rest of the EU in forming an army?

With their fishing rights in our waters entirely revoked and the Spanish fleets agitating for increased quotas in the Irish waters how will this affect the rural parts of Ireland?

Lidl and Aldi are both based in Ireland but will no longer be able to source their goods and especially their agricultural produce without paying huge tariffs..

Apple too is based in Ireland but will face large tariffs to access the UK market.

Worst of all I imagine Amazon is also based in Ireland but surely wouldn't be able to compete on price. Gawd knows how many billions worth of trade this amounts to alone.

Also what of the preferential corporation tax in Ireland that the EU wants to 'harmonise' which would mean doubling it. Under the qualified majority voting how long can the Irish alone hold out?

What, to counterbalance all this, are the positives?

Spinflight

While it is true that the EU wants to move quicker to become a Federal State of Europe, with as the new French President Macron wants, the ‘elite’ 19 country Eurozone to have its own MEPs etc – the Republic of Ireland is in the Eurozone, and as they refused to give up their 12.5% Corporate Tax rate to German and French demands to get a financial bail out after the financial crash – one can assume they will keep that a lot longer, until Brussels finally runs the EU show and all countries (or those within the ‘inner’ Eurozone circle) lose the power of veto.

Clearly that would then help the UK, unless by then Labour’s higher taxes for business takes away any advantage companies in the Republic would have, relocating to the union, rather than other EU countries.

What we have to positively remember in that the EU sells more to us than we do to them, and so in their mutual interests to have Tariff Free trade.

That is why in the strict EU bureaucrats schedule of Brexit negotiations, they want to try and extort money first from the UK, before they talk Free Trade, but as the EU Trade Commissioner says, the (EU) bloc will do post-Brexit free trade deal with UK “for sure”.

Brexit negotiations have just started on at least a 2-year journey, and as you say the one thing both sides agree on, is to keep the borderless Ireland.

Panicking everytime an issue comes up, just helps EU negotiators.

Given what Junker said about MEPs today perhaps we wont have to worry about him much longer.

I confess to not knowing a huge amount about Ireland and it's economy. Anyone who does, how do you think Ireland will respond to the push from Juncker and Macron for an EU wide tax level? I'm guessing they are not going to want to give up the benefits they currently reap from being an effective tax haven. I see trouble ahead.

The vast amount of Irelands trade is with the UK. Almost all of Irelands business with Europe goes via Liverpool and the Tunnel. One feature of these talks that the smaller economies will be looking at is the attitude of the EU big boys to destroying smaller economies

cdtaylornats

Juncker’s rant yesterday to only around 30 MEPs in attendance to the European Parliament for the closing of Malta’ time in the ‘big chair’, and the bun fight that ensued, would in the real world have some baring on his future, but Brussels bureaucrats don’t answer to ‘the people’ and so only seem to go when they want to.

Ironically Malta was indirectly reminding the parliament that it was Junckers borders inflexibility to Cameron (pre EU Referendum), not offering any respite to the pressure on our homes and services, that resulted in our leaving.

Unfortunately for the future of the EU, Juncker is by no means the only Federal States of Europe ‘at any cost’ idealist at the top in Brussels, as shown by that nice (read vindictive) Mr Guy Verhofstadt - one of the Lead Brexit negotiators, who recently ran for the President of the EU position, and thankfully failed - wanting a much closer harmonisation/integration of the EU, and knows the UK he hates, never did.

Verhofstadt is a piece of …work, as on one hand he is saying that the UK is welcome to stay in the EU, but on the other hand saying, only if the UK contributes far more to their failing experiment, by giving up our “entitlement” to the Thatcher rebate, that from the 1980’s significantly reduced our annual contributions, some of which that idiot Blair gave back when horse trading subsidies with France.

People like Verhofstadt wants a Federal Gloop of Europe, with member states having given up some or all of their powers of veto, and completely ‘harmonised’ members via taxation, accounting, eventually (unsustainable) pensions etc – which would only benefit the larger states on the mainland like Germany and France.

As when smaller member countries struggle with a much higher Euro and Euro interest rates, within the economically dysfunctional Eurozone model where ‘one size fits all’, they will be UNABLE to adjust to boost their economy/jobs.

Maybe there will be little blue uniforms with (by then ) 33 gold stars on for everyone to wear as well.

RortyCranckle

To put some perspective on Ireland's trade with UK as mentioned by cdtaylornats post, I'm sure that in 2010 I heard that the UK was doing more trade our near neighbour than the 2.4 billion consumers within Brazil, Russia, India and China - which kinda shows how complacent we had become recirculating the wealth within the EU, while they were struggling for growth with non competitive economies and currency, some could have devalued more than the Euro, if their own..

Interesting, thank you Thea . How hard do you think Ireland is going to fight against the EU who I understand are not happy with its 12.5% Corporate Tax rate?

RortyCrankle

Well put another way, when the UK government informed the EU that if they offered us a rubbish deal that affected our countries international business competitiveness (the not commercially minded Corbyn calls ‘becoming a tax haven’), they went apoplectic, demanding that THEY can dictate to the UK our tax rates AFTER we leave. Idjuts.

As it is, for UK companies needing to do business within the EU, you may have heard its still up in the air re ‘passporting’ rights to trade with the EU, especially in financial services – where it looks around 20-25% of their Investment Banking company may have to be relocated to an EU member state – but as that means needing to hold more capital etc, even that might not be viable, which is a problem for a Europe needing the investment banking services to hedge etc, from the city.

WHICH EU member so far has been mixed, often along the lines of existing non UK mainland offices in Europe, or the need to be near the central bank etc,

But the point is they don’t want to move lock, stocks, and barrel their whole operation to Europe due to restrictive labour laws etc – and to my mind, the Dublin option is a no brainer, if allows ‘passporting’ rights and has the 12.5% Corporate Tax to very profitable companies –plus the city is so beautifully practical, and the Guinness DOES taste so different.

Clearly for manufacturing etc, being in mainland Europe rather than in the most far flung western EU outpost, would be a different advantage.

In conclusion, the Japanese have a saying ‘the tallest nail gets hit first’, and a 12.5% plus Corporate Tax Rate is a huge target, especially if Dublin becomes the main option for relocation choice – so you’ll have ‘Juncker and the boys’ knocking down the door sooner than later, IMO - IF say Paris via new President Macron, doesn’t try a similar thing, and lower tax zones becomes more EU widespread.

Junker's boys appear to be booting the back door down instead. $2bn for Google, $12bn for Apple. Doubt these will be the end of it.

Fines levied by the EU of course go straight to EU coffers.

Saw a very angry Irish MEP complaining bitterly that the future direction of the EU was not being discussed despite many promises to do just that.

It seemed to be the specific promise to hold meetings about it in Dublin to advise a white paper, and the reversal and refusal to discuss that ired him.

You can understand that Ireland desperately needs to know the future direction, especially given the clear threats and challenges it is due to face.

Good for him. It's hardly an unreasonable request is it.

He did say he had raised the matter with junker. Would have got, "more sense if he'd stamped on a cat's tail."

Spot on.

Is it just me who doesn't understand this? If I recall, Merkal has effectively been leader of the EU for the last approx ten years. Would a revolving leadership with representatives from each member state being leader for a one or two year period not be more equitable? Same with Juncker, who has been president since 2014. Surely it's time for a change?

I appreciate this means their plotting for the future may change but that's probably a good thing.

Spinflight

Germany ‘running the EU for the last decade’, nicely ties in with the Financial Recession, which of course led to an Economic one, as it was Germany who was guaranteeing the European Central Bank etc financial bailouts of countries like Spain, Portugal and of course the Republic of Ireland and/or their banks (as it all became very blurred who was bailing out who) – estimated to have been around Euro 3 trillion.

Germany would have leveraged that financial help within the EU membership, but in effect, Germany was bailing out their own banks (and lesser so to those of France and Belgium) that had fuelled the pre 2008 crash Eurozone lending/debt boom - that by 2009 with huge exposure to the further above mentioned three countries, and Italy and Greece – there would have been a much wider banking crisis of their own, if Germany and France had NOT bailed out the other countries.

German banks are still rumoured to have bad loans on their books, Italian banks that by EU rules should not have had a bailout out, recently has, meanwhile the European Central Bank is STILL pumping in Quantitative Easing (QE) type member state bond buying operation the UK stopped several years ago – again now in the Euro trillions that will have to be reversed one day.

Re closer Eurozone integration with a view of a 2 speed Europe, the German and French axis had been weaken a bit since 2012 as Germany and socialist President Hollande did not have much in common.

But new President Macron, an ex-investment banker who wants to model the French economy closer to the UKs - is not only more in tune with Germany economically, but also in heading towards a ‘core’ Eurozone that probably goes beyond the 6 founder members, but how many more Eurozone members depends on how integrated they are willing to go towards a near Federal entity.

Below is quite an interesting short article on the subject, mentioning various problems facing the EU, and concludes that “more Europe” is not the answer to any of them.

“Warning: the EU's integration drive may backfire.”

Love reading Theasaurass' posts.

Just to add, a good benchmark is to watch Deutchebank particularly. They have managed to avoid a total catastrophy recently by selling out a significant portion to the Chinese, without which they would have gone under. Does that mean the Deutchebank crisis is over? No. The same issues that drove them to the brink are still at play. Just as the Italian banks nave needed to go back for further bailout, the whole euro 'model' is failing.

And could yet fail both spectacularly and quickly.

Before his election I expected Trump to repatriate the euro dollars pronto. Instead the EU is nibbling at them with fines.

The only reason I can imagine that Trump hasn't done this, it makes total sense from his perspective, is that it would instantly crash the eurozone banking system.

Hence why it wouldn't surprise me if he waded into the brexit negotiations. When you have a jolly green giant by the short and curlies you might as well make him do something. :)

Spinflight

Regarding "future spectacular failures".

The global debt figure is now truly staggering, as of course the 2008/9 financial recession (that both caused the economic recession and held back the usually bank lending recovery) was the worst since the 1930’s, and that a 2008/9 UK great recession that few predicted, can happen again at any time – but most of the indebted countries will no longer have the financial ‘firepower’ to stop the consequences, which will mean substantially cutting public services spending, at the very least.

The following link “European debt crisis: It's not just Greece that's drowning in debt” gives a picture of EU member states debt versus GDP, and mentions that only a few countries have REDUCED their debts in ‘real’ terms’ – and in that respect, Ireland gets mentioned in despatches with a gold star.

In debt cash terms the link mentions;
“There are five EU countries that have debts standing at over €1trn: the United Kingdom, Italy, Germany, France and Spain.”

Which exposes two red flags with Brexit and our UK domestic politics;

• The now largest FOUR EU country member economies are no longer able to SUSTAINABLY fund the transfer of funds from themselves to smaller and emerging member states now, never mind in the event of another financial ‘event’ – which clearly explains their extortionate attempt to claim Euro 60 billion to 100 billion from the UK without a detailed invoice, as a divorce settlement.

• The UK is in no position now, or in the uncertain future, to go on a reckless spending spree when the UK already has £7.2 trillion plus in National Debt, and unfunded pension liabilities of both the State and government employees, that get paid out of annual government budgets, when fall due.

I totally agree Thea,

I'm not too sure that our somewhat insulated financial system would be exempt from the end game of the euro crisis, though our chaps have had a decade to prepare for it. And let's be honest it has seemed like an inevitability for some time now.

Euro dollars are not however confined to Europe. International trade between eastern nations can often be in dollars.

The fact that China doesn't have central bank swap facilities with the US means that a chain effectively exists eastwards.

Not only would repatriating euro dollars, which are mainly profits from American companies abroad, prevent the EU from getting their grubby mitts in them, it would also have a dramatic effect upon China and stoke inflation in the USA.

So none of this sounds at all contrary to Trump's desires and aims, yet there hasn't been a mention of it thus far, or not since his electioneering.

It isn't explicitly a matter of debt, but of liquidity in hard currency. Whilst euros can be easily exchanged it doesn't make any noticeable difference.

Remove the hundreds of billions in dollar deposits from euro zone banks though and you don't have to be a financial genius to name a few that will go under.

Hence, simply put, Trump has an auto destruct button on the euro zone which it effectively costs him money not to use.

And those wise European leaders are so pleasant and diplomatic about him and his friends that I can't see any circumstances where he would press it. :)

Spinflight

The so called ‘Eurodollar’, as beyond the jurisdiction of the U.S. Federal Reserve, has been around for several decades, in fact it was the growth of that external $ market and the scattering of banks around Europe that needed to be in one place that could accommodate their physical growth – that chose London from the mid 1970’s, and the precursor to the investment banking etc activities in the City today – but I neither see where you are going with that line, or subscribe to a dollar, or any other crash, yet.

President Trump ‘the businessman’ if manages by lower domestic taxes, with fewer OECD inspired global tax havens for companies to hide money etc, to encourage U.S. corporations to bring their Eurodollars back home and invest in ‘America first’ factories, production and jobs, I can see a potential problems with FEWER dollars floating around the world (including being invested in Europe) – but before ANY crash, the PRICE of money RISING would have red flagged a more systemic problem.

In fact, as inflation rises here and in Europe, we have to remember our Base Rate is the lowest it has ever been since the late 17th century when the Bank of England was founded, and it wasn’t that long ago ‘normal’ yield curves meant governments had to pay ABOVE inflation (up to a 2% premium) to borrow money from bond investors – so those politicking about ‘real’ falls in earnings due to inflation, better watch what they wish for as the historic ‘remedy’ is to squeeze inflation out of the system via higher interest rates.

Regarding the Eurozone where QE money is STILL being pumped in, they have inflation issues as close to 2%, and where the European Central Bank effectively forms a guarantee, or member state protective umbrella ‘as a whole’ - which means those that member states who might be rated ‘junk’ and pay much larger borrowing premiums if on their own, do not so as Germany’s (and to some extent France’s) credit rating is in the ‘risk’ credit assessment, by ratings agencies.

My point is that with 2% Eurozone inflation, a threat of European Central Bank stopping QE soon, and the interest rate yield curves ‘normalising’, in 10-year government borrowing, Spain should be paying MORE now than 1.72%, Italy 2.33%, Portugal 3.10% and Greece with all its problems 5.28% - and so IMO any European interest rate versus ‘normalising’, combined with a credit market ‘event – could see those member countries new borrowing and debt service bills rocket up as markets more than ‘price in’ the new interest rate scenario, with a knock on effect to the likes of Germany and France, needing to guarantee a smaller Eurozone financial bailout (hopefully) than before.

AS you will be aware the main difference between the 1930’s Depression in some countries, and the 2008/9 great recession, was the quick action by central banks to flood the market short term (or so they thought) with as much banking liquidity as they needed to keep the bank lending taps open to businesses and citizens – but for countries that absorbed the cost of a banking crisis, and their central banks ‘creating’ money on their own balance sheet they never had pre 2008 by QE type operations – they have now used up their ammo.

(I think we have moved well off subject and probably need to get back )

Not really, everything is related to everything else. :)

The euro zone for instance insists that London's clearing activities will move, and Dublin hopes to take some of that business. The Americans meanwhile are firmly telling the eurozone in general no.

You are talking about the wider debt crisis. Whilst related however they aren't the same thing. Hence we are somewhat talking at cross purposes. I agree that the eurozones wider financial problems are being hidden, especially within payment systems, and that the sovereign bond rates are nonsensical.

Inflation though is a good thing for indebted nations. Less so for those on variable rate mortgages once interest rates rise.

"Inflation though is a good thing for indebted nations."

Its only a good thing for those indebted nations with their own currency, that could inflate away their debt burden. Inflation has a different effect on the eurozone.

What you also have to keep in mind, is that the ECB have now set themselves up in a supervisory role.

On the surface, all well and good. Surely supervision is essential considering the rather bad habits eurozone member states have been guilty of? However, theres a huge knock on effect of this. Firstly they charge for the priviledge of providing that supervision whilst demanding a level of bureucracy and regulation over and above what banks have to provide on a national level. Secondly, As Theasaurass points out, they are working on low interest rates. And thirdly, they are so far behind what US investment banks offer in terms of efficiency and well led strategy, they were struggling to compete before picking up the 'supervisory' role, theyre a world away now.

Oh, and they have massive conflicts of interests to deal with at the same time.

Bailout can be seen to work in the past, take Ireland and to a lesser degree Spain. However, if (as is suggested regards Spain) if a nations government hasnt been totally open about the level of debt accrued to facilitate the economic turn round (or if policies have only been shortsighted which is common in domestic politics), then no amount of supervision can miraculously fill a black hole.

Jose may feel a little more secure that his family savings are in a 'reputable' supervised local bank, but foreign investors have nothing whatsoever to attract them. Ireland on the other hand just serviced their huge debt via other sources and indeed rebuilt confidence from foreign investors by doing so.

This isnt just a centralised banking issue, its utterly hobbling the national banks of any eurozone member state. Yes inflation and interest rates are a hairs breadth away from bringing this whole house of cards down, but also, even with a fair wind and calm sea, they just cant compete.

The EU, in their ultimate desire for a federal europe, has done what the EU does best, they have crippled their own competetiveness in the banking industry. Short term self survivalism yes, but ultimately they are now totally on their own with no ability to compete globally.

Coming full circle, back to your Ireland question, I think we're understimating the Apple tax farce. Yes its partially on a back burner for now, but is heading to the european courts next year I think. Judgment aside, dictating to Ireland the tax rates they must charge and then enforcing it with such an eye wateringly high bill to Apple, has only achieved 1 thing. Future investment in Ireland certainly on their currently low offer of corporation tax, must be approached with caution. The EU may sting you anyway. Its not exactly a positive state of affairs for Ireland. I think Ireland will leave, absolutely certainty if they lose the Apple tax case. I think their very survival will depend on leaving.

So London, when do we offer 12.5% corporation tax without the shackles of the EU, and bearing in mind the shrinking of the EU banking sector, align ourselves better with US led investment banking?

Excellent post Caroline.

I hadn't really thought through the effect of inflation on a country that doesn't control it's own currency.

I think the media is underestimating the EU's rather cavalier approach, the white house on the other hand is treating it as an attack on itself. Which given their Liberalist tradition is not surprising.

Also Trump's speech in Poland, which has largely been glossed over is, I think, significant.

With inflation on the rise, and the German people traditionally wary of it, one does wonder whether the media proclaimed leader of the Western world might actually finally have to do some leading in the run up to the election. There seems to be a lot on hold until her recoronation, and little of it will be music to Irish ears.

I think what is clear Spin, within the eurozone, is member states realise they have no alternative, at the moment. Merkel will be ok in the Autumn elections, but thats not because of popular support, but simply because there is absolutely no alternative to the Merkel plan and the ECB. None. Mainland eurozone states specifically, are utterly committed up to their ears legally and financially. It really is shit or bust.

However, what I do think is becoming a stronger and stronger possibility, is the influence of the IMF. IMO, the only way forward will be to have an international clearing union overseen and co-ordinated by the IMF. Whilst EU bureaucrats are running around (validly?) flexing their financial muscle on eurozone members, they ignore their dire position on the global stage.

Taking the two examples of the UK and Ireland.
For the UK outside the EU, an international clearing union opening up controlled and balanced financial international policies by utilising global reserves is a no brainer (and tbh I think is absolutely going to happen anyway as a post Brexit London finance powerhouse steps up).

For Ireland within the EU, it is exactly what they have attempted to position themselves for when they exited the bailout programme.

The fly in the ointment is the EU themselves.
Would they really block any attempt at an IMF International union by making it illegal for member states to benefit from it? Yes, understandable as they square up and posture against a post brexit UK, but utterly misunderstandable as they block Irelands efforts on a global stage.

If they therefore did, its absolutely game over for the EU and ECB.

What europhiles miss regards Irelands position, is that whilst the 'corporate tax' carrot did indeed bring a dramatic influx of investment that saw their GDP national debt ratio shrink dramatically, it didnt actually provide jobs. Jobs remained in London, but tax wrappers exist in Ireland. The employment possibilities in Ireland remains almost unchanged from their darkest hour in 2010. Finance, and how that finance is structured is absolutely the difference between Ireland today, and Ireland on the brink of collapse 7 years ago.

How fast could a dramatic u-turn on EU financial policy happen? Pretty quickly IMO and Ireland, Apple and the US have far greater impact on Brexit, than is currently acknowledged. The UK needs to continue doing what its doing, and thats help create a truly international 'alternative'.

The EU isn't noted for speed in anything, which is particularly problematic given the common travel area.

Interesting too don't you think that Trump may have unintentionally given the impression that the UK were breaching the Lisbon treaty by negotiating a trade deal with the cousins before having the competence to do so.

Such naughtiness was denied by the prime minister of course. Existing trade arrangements are being fine tuned in anticipation of such discussions apparently. :)

Caroline, isn't the issue not so much the 12.5% tax rate but the fact that Apple did not pay anything close to 12.5%. Tax rates should not be individually negotiable by large companies.

But on the question, a hard Brexit would be disastrous for Ireland and N. Ireland in particular. Farmers in the border are regularly sell on the other side of the border, just like it's a single country. If the UK decides to leave the Customs Union, this would not be the same and the NI economy would really suffer.

There are no positives for Ireland for Brexit, but then there are no positives for the UK in Brexit either.