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Dublin Report Eurocrats offer Noonan an issue against McGreevy, FF

February 16, 2011

By Staff Reporter

By John Kelly

Ireland’s finance minister, Charlie McGreevy, has a point about the European Union. But then, every other member state has at least one point against him. This week, the majority of our European partners will lay them all on the bottom line when they will attempt to push the reluctant Kildare man over the final hurdles of political correctness.

As an enthusiastic betting man, McGreevy knows the home stretch is going to be a rough ride indeed. But he really does not seem to give a damn. His up-front view is that so long as the punters at home are happy, the EU can get lost.

The domestic punters are quite content, as poll after poll indicates. The Fianna Fail promise before the last general election to cut taxes and radically reform the system, root and branch, has been largely implemented. One more budget remains for McGreevy to push through the entire package.

Two obstacles remain. One is the European Union. The second is Michael Noonan, the new leader of the Fine Gael party.

The EU has given Noonan an opportunity to put down a marker between Fine Gael and Fianna Fail. He can, if he so wishes, attack the government’s financial policy, putting himself four square behind the more conservative approach advocated by the leaders of all of the European nations.

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Historically, it would underline the first real difference between Irish political parties on a European issue. As a party that has always adopted a conservative approach, what could be more appropriate?

Fine Gael has always regarded itself as the model of political rectitude. The EU presents it with the opportunity of reinforcing this while marking a clear line of departure with Fianna Fail.

It is a near certainty that the EU will censure Ireland for its budgetary policies. In the face of harsh criticism, couched in the most diplomatic language, McGreevy remains obdurate. With the close support of the taoiseach, Bertie Ahern, he insists that government budget policies will continue.

It is virtually certain that every one of the other member states will vote in favor of the censure motion, even though some, especially the UK, may support Ireland’s right to handle its own economy.

However, after his strong speech in the House of Commons and his declaration that the UK intends to join the Euro currency, British Prime Minister Tony Blair is not quite so likely to give any public backing to the Republic. At best, according to the best-informed sources, the UK is likely to abstain.

The big problem for the EU is the level of Irish inflation. Senior European bankers and top Eurocrats insist that the budgets advocated by McGreevy and pushed through by the government are inflationary. They charge that continued tax cuts and policy changes within the taxation system have led to an underlying inflationary trend.

The widespread belief is that the economy, one of Europe’s most successful, is overheating. Following the advice of top bankers, the EU is now determined to condemn Ireland’s budgetary policy and to make a public formal declaration to that effect.

It will prove to be highly embarrassing to the government despite McGreevy’s continuous insistence that his policy is the best one for the country.

He will also argue that the most recent figures show that his government is cutting inflation. The annual rate is down to 5.2 percent.

Economists also predict that it will continue to fall until it averages about 4.5 percent, a level that will be just about acceptable to the EU.

However, there is now every indication that Eurocrats intend to get tough with Ireland unless the government toes the line. The whispers are getting louder. Some have even argued that funds provided by Brussels without which the Irish economy could not have become such a spectacular success, contribute to the inflation figures.

The warning is a serious shot across the bow for the Celtic Tiger.

The withdrawal or even the partial withdrawal of such funds would pose serious problems indeed.

Potentially even more serious is the continuing decline in the fortunes of high tech companies in the U.S. Increasingly, Irish jobs are dependent on such companies.

Motorola, for example, employs about 130,000 people around the world. Five hundred are employed in Cork alone. Now the company has declared it is cutting 4,000 jobs worldwide. Cork may suffer as a result.

Other U.S. companies with similar subsidiaries here are also suffering from the general high-tech downturn. Dell employs more than 5,000 in Ireland. It has announced plans for the first layoffs in its 16-year history because of the ailing U.S. economy. Almost certainly, Ireland will be hit.

Gateway, the multinational visited by former President Clinton when he was in Dublin, has already announced that it will cut 3,000 Irish jobs.

In light of these setbacks, McGreevy and Ahern may gain slightly in popularity for cocking their noses at the EU, but it may not be the right time to pursue that particular course with the sort of gusto both have displayed.

Even the most arrogant occasionally have to display some humility. It may now be the right time for the Irish government to pull in its horns, however slightly. McGreevy should chew a crumb of humble pie while still continuing to defend the Irish budgetary policy before the rest of Europe.

Clearly, the Irish government is doing something right, as McGreevy and Ahern insist. The Irish growth rate is projected at 10 percent, while the rest of Europe will rise by only about 4 percent. It is indeed a great phenomenon.

But it has been accomplished with considerable assistance and funds from Europe, any of which can be cut back at almost any time.

Noonan and the Fine Gael party could do Ireland a big favor by offering the electorate the genuine conservative alternative. The big danger to him and to Fine Gael is that there may not be any support for such conservatism.

He will need to display considerable courage if he is to discover the truth.

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