‘Euro-critical’ monetary policy will not work

The most striking feature of the RTÉ and TV3 debates among the candidates for the European Parliament is the absence of anything substantive about the future of the eurozone and Ireland’s place in the single currency.

Living up to the old adage that ‘all politics is local,’ issues such as water charges, the property tax and austerity were all given a good airing. For anybody tuning in who did not know anything about Irish politics, it would be hard to discern that the country is part of a monetary union. But it is and the European Parliament will have an increasingly important role in the future of the Irish economy.

This newspaper carried a report on Thursday on a seminar given by the respected chief economic commentator with the Financial Times, Martin Wolf, about the prospects for the euro. His argument is that the project is only half complete. Without moves towards fiscal union, a more active role for the ECB in economic development; eurobonds and debt restructurings for highly indebted countries, then it is hard to see how monetary union can survive in the longer term.

It is hard to disagree with Mr Wolf’s rationale. But the rise of populism throughout the EU could make it impossible to achieve these reforms. This article was written before the results of the euro elections are known. The Dutch far-right and anti-EU Freedom Party appear to have done worse than expected. However, UKIP are on course for significant gains in Britain.

Sinn Féin and independents look set for major advances in this country. But what are the implications of this electoral success?

Sinn Féin candidate, Lynn Boylan, described her party’s position on the EU as being ‘Eurocritical’. In a campaign full of vague blandishments, this is possibly the biggest non-statement of the past few weeks. Although, in many respects it encapsulates the dilemma facing Sinn Fin. The party has campaigned very effectively on an anti-austerity platform. It has very skilfully exploited growing disaffection with the policies the Government has introduced over the past few years to bridge the yawning chasm with national expenditure and income.

Instead of water charges, a property tax and spending cuts, Sinn Féin says it would have cut the budget deficit the ‘fair way’. By this it means a wealth tax. Unfortunately for the party, the sums do not add up.

However, as an electoral strategy it has played well with a certain cohort of the population, mainly working class males. But if Sinn Féin is to make inroads at the next general election, it will have to widen its appeal.

This will put its ‘eurocritical’ position in the spotlight. Ireland has ratified the Fiscal Stability Treaty, which is a binding commitment to run balanced budgets. If it is serious about forming a government at the next election, then Sinn Féin would have to present a much more comprehensive set of economic policies to show how it would achieve this. If it puts flesh on the bones of a wealth tax then it will alienate even more the middle class vote. If it tries to share out the burden of adjustment, then it risks a backlash from its core vote.

But its attitude to the euro will potentially present it with its biggest headache. If the euro is to survive, then further integration is necessary, which means a referendum.

If being ‘eurocritical’ ultimately means being anti-euro, then it will set up a confrontation with Brussels that is unlikely to end well for this country.

Despite all its recent travails, the majority of Irish people remain well disposed to the EU. Again if Sinn Féin moves to the middle ground on Europe, it will not go down well with its core vote.

Sinn Féin has an impressive military-like discipline to policy. No dissent is tolerated from the party line. It has a singular voice and vision. But on issues as nuanced as the economy and the EU, the party will have to broaden its outlook and become much more realistic. That is the biggest challenge it faces.

John Walsh is Irish Examiner Business Editor.