Pyrrhic Brexit victories are of very little value

In the event of a no-deal Brexit we will have to up our game, writes Jim Power

Pyrrhic Brexit victories are of very little value

In the event of a no-deal Brexit we will have to up our game, writes Jim Power

As we enter the month before the month that the UK is due to exit the EU, we are no clearer about where this process is going than at any stage over the past two-and-a-half years.

Having had her withdrawal agreement comprehensively defeated, British Prime Minister Theresa May scored a rare victory this week in Parliament when she supported a motion to have the so-called Irish backstop renegotiated with the EU.

However, it represented a pyrrhic victory as the EU appears adamant that it will not renegotiate the backstop, to which she signed up to a few short months ago. The British parliament also voted to avoid a no-deal Brexit, which does not make very much sense, because in theory at least, if the EU agrees to revisit the backstop and if no alternatives can be found, then a no-deal Brexit would appear to be the only real option.

It is inconceivable - and has been from day one of this crazy and illogical process - that if the UK and Ireland have different trading arrangements, a hard border could be avoided. Strangely, the British parliament has also rejected a motion to seek an extension to the process. Of course, most of this can be changed, but the omens are becoming more ominous.

Given the history of the North and recent events in Derry, such a hard border would most likely be quite similar to that which we were familiar with back in the bad old days. I was quite amazed last week at the reaction to the Taoiseach’s description of what a hard border might look like. He was stating the bleeding obvious and I think it is important to get that message out there before the UK commits an act of hari-kari over the coming weeks.

The Taoiseach was correct in what he said and he was correct to say it. If weak politicians and others want to score political points out of it, then that is obviously their choice, but it obviously makes no sense.

It is really hard to say where this process is going to head over the coming weeks but the possibility of a no-deal Brexit - by accident rather than by design - looks more real. Hopefully, sanity will prevail in the UK political system, but that trait has been in short supply for some time.

A concern for Ireland is that while on the surface, the EU appears totally supportive of the backstop agreement, there is a sense that - faced with a hard Brexit - powerful business interests in Germany and elsewhere who sell a lot of stuff into the UK, might not be quite as enamored with the failure of the EU to renegotiate it and risk a no-deal Brexit. Having thrown the Irish under a bus back in 2009, I wouldn’t be totally confident it would not do so again.

Back in Dublin this week, the Department of Finance published some early thoughts on how Brexit might affect the Irish economy.

Under a no-deal Brexit, the view is that the Irish economy could be 4.25% smaller than the current projections in five years’ time. Employment would rise more slowly and the unemployment rate could rise by two percentage points, and the public finances would deteriorate.

Agri-food and the indigenous manufacturing exporting sectors are, not surprisingly, deemed to be most vulnerable. The department also figures that by 2023, the economy would be 6% smaller relative to a hypothetical no Brexit scenario.

In the event of a no-deal Brexit, the Irish economy will continue to function and will be forced to adjust, just as it had to when we originally joined the EU and then broke the link with sterling in 1979. Unfortunately, we didn’t adjust very well after the commencement of the economic and monetary union and the results were pretty catastrophic.

In the event of a no-deal Brexit we will have to up our game and focus on building up the attributes that should characterise a modern dynamic economy. We have quite a bit of work to do.

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Wednesday, July 21, 2021

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