Ireland should adopt new currency like South Sudan & Timor-Leste
Ireland should join the UK by leaving the European Union according to a retired Irish ambassador to Canada — the argument is not based on serious economic analysis and it's not clear if the former diplomat realises the risk to his lavish public sector pension when a new currency would be issued and he cites "South Sudan and Timor-Leste" as examples.
Even at the height of the Greek crisis, voters did not support abandoning the euro.
Ray Bassett says in a briefing published this week by Policy Exchange, a British think-tank, that Ireland should join the UK and negotiate with the EU on terms of a trade agreement.
Bassett argues that the Irish have a much deeper connection with Britons through "some form of political association for nearly 700 years" than with mainland Europeans.
The British government in the aftermath of the indecisive general election on June 8 has no clear Brexit negotiating strategy and the Guardian reported this week that [With the Treasury and business increasingly in the ascendant since the election, ministers are being told they face a choice between protecting economic interests by compromising on free movement and the jurisdiction of the European court of justice, or prioritising sovereignty and settling for a much more limited trade deal. Premiering a new and useful way of looking at Brexit variants (as opposed to the vague and poorly understood “hard” and “soft”), one official put it this way: "There are only two viable options. One is a high-access, low-control arrangement which looks a bit like the European Economic Area. The other is a low-access, high-control arrangement where you eventually end up looking like ... a classic free trade agreement, if you are lucky."]
Bassett wants Ireland to join the UK in what would be termed an Irexit at a time of huge uncertainty on the price the UK will pay for leaving the world's biggest market — political opportunists like Boris Johnson and Michael Gove argued for taking back "control" but it's clear already that there is no trade Eldorado in the former Commonwealth or elsewhere for a country like Ireland, that has a huge reliance on foreign direct investment (FDI).
Global banks dominate UK services exports and foreign car companies dominate merchandise exports. The notion that the UK can replace Germany as an exporter to China for example, is delusional.
Besides, the UK has been dependent on the "kindness of strangers" for more than 30 years when it has reported persistent Balance of Payments/ Current Account deficits.
The Eurozone is Ireland's biggest export market, equivalent to the size of combined exports to the US and UK.
Given the need to reduce the over-dependence on FDI and to raise the dismal performance of the Irish indigenous international sector, the solution is not to return to UK protection but to plan a big change in enterprise policy for the next 20 years.
Bassett warns that President Macron of France is a threat to Ireland's 12.5% corporation rate but this is bullshit — changes that will reduce tax avoidance which cuts effective rates to low single digits, are proceeding and the former diplomat does not consider the impact on inward FDI of ending our current access to the single market.
The EU currently subsidises about 70% of typical farm household income and the Irish beef industry would not survive without subsidies.
Bassett says "The country is still vulnerable to destructive currency swings, something it has no control over" but the launch of a new currency and the dislocation that would follow including Ireland having to negotiate new trade agreements with a huge number of countries, would surely result in chaos.
In advance of an expected introduction of a new currency, there would likely be a run on the banks and the former diplomat is as sanguine as President Trump is about the fallout from irrational economic risks:
There is no cost-free scenario but given the problems Ireland has in having any influence over its currency, it might be a price worth paying in the longer run. If South Sudan and Timor-Leste can launch their own currencies, surely one of Western Europe’s most successful economies can do so. Ireland, of course, did drop out of a common currency, Sterling, in 1978. Hopefully, a relaunched Irish currency would hold its value, especially in the longer term, to ensure that the country’s large foreign debt (a relic of the EU Bailout and its consequences), would not rise unduly because of adverse exchange rate movements. Given Ireland’s good economic performance, this is not an unrealistic expectation.
Ireland is not "one of Western Europe’s most successful economies" and it has a high reliance on foreign-owned firms.
The IMF bailout followed disastrous policy making in Dublin not Brussels.
Bassett deals in generalities and he does not make a credible case that Ireland currently ranking with Italy for individual standard of living, will really gain from an Irexit.
Goods exports transhipments through the UK can be catered for but launching a new currency with no assurance that returning to the UK's protection will enhance Irish prosperity is a risk a naive superannuated retiree could only afford to make.