Back in the last century Guido was very much in a minority in Ireland opposing swapping the punt for the euro – “it is the future”, “it will make things easier when we go on holiday”. Not the strongest economic arguments. More often the antipathy was blamed on Guido spending too much time in the company of British Eurosceptics.
Now times have changed. Being in the eurozone is recognised as having exacerbated the property bubble. Interest rates were just too low and cheap money flooded into over-priced property. If Ireland’s central bank had interest rate sovereignty it would have raised interest rates – it couldn’t and the Irish property crash will be one of the world’s worst as a result.
Now the economy is in trouble Irish interest rates should be lowered to make the currency more competitive and the attractive to U.S. investors. Ireland is a high cost country for American investors who now look elsewhere. Irish finance ministers John Bruton in 1986 and Bertie Ahern in 1993 drove down the punt to bring in foreign investment when economic growth was faltering. But as a member of the euro, devaluation of the exchange rate is no longer an option.
Yesterday the president of the ECB, Jean-Claude Trichet bluntly told Paul Tansey, economics editor of the europhile Irish Times that “the ECB has to care for the superior interest of the euro area”. Tough luck, Ireland isn’t important, monetary policy will not help the Irish. Anti-treaty campaigner Declan Ganey says the Irish are not eurosceptic, they are Brussels-sceptic. As the Brussels political elite’s contempt for Irish democracy becomes clearer, that could change…