When you have eliminated the impossible…

A quick thought on the news that the UK “offer” has been agreed by Cabinet (see Robert Peston).

One thing that has been underdiscussed in all the arguing about the Irish border issue is that the core principle of the Good Friday agreement is cross-community consent. The agreement foresees that there can be no change in the status of Northern Ireland without the consent of both communities, and the agreement itself was subject to an act of public consent in the form of a referendum. This is crucial to the whole project. Cross-community consent offers a guarantee to the Unionists that they cannot be sold out by the British, but it is more than just a Unionist veto. To say that there can be no change without cross-community consent is also to say that there can be change, if such consent were given. In taking imposed change off the table, it puts the possibility of change through consent on it.

This is sauce for the goose and for the gander. Stephen Bush on the New Statesman has repeatedly pointed out that there are precisely three options:

a) a land border
b) a sea border
c) no border

The problem with both a) and b) is that they both represent a change in the status of Northern Ireland. I suppose a real sophist might try to claim it wasn’t substantive change, but I can’t see it washing with anyone. If you are committed to the GFA, like all British and Irish political parties, you can’t really support either unless you think you can convince the Unionists to accept b) or the Nationalists to accept a). Neither is realistic. It is not just that the DUP would hate b) or Sinn Fein a) – neither option is acceptable in terms of the GFA because both involve a change in the status of NI imposed on one community or the other.

With a) and b) ruled out that leaves only c), no border. Even the much mocked DEXEU paper on drones, balloons, and such is a sort of twisted acceptance of this point. The point of a “frictionless” or “invisible” border is that it is very like no border. This leads us to a further trilemma. The DUP, and indeed the British government, has acquired three commitments:

1) the Union
2) the GFA
3) Brexit, defined to exclude the customs union

The first is existential. The second is extremely important. DUP ministers, members, and voters benefit from peace and the open border. The third was entered into verbally when Theresa May chose to up the rhetoric at the 2016 Conservative conference, and is not binding in any way. If the first cannot be given up, the second would be extremely costly to give up, and the third merely embarrassing, what do you think will give? How does your answer change now the government has agreed to pay up?

This is why I have not been particularly worried about the Irish element of Brexit, and why I think we’re staying in something.

Brexit and Banks

With Prime Minister May due to trigger Article 50 eight days from now, shit’s about to get real the clock is about to start ticking, not least for the huge financial center in London. Nothing in the present UK government suggests that they will be able to negotiate an amicable separation in the twenty-four months before they are unceremoniously bounced from the European Union. (Less actually, as agreements will have to be finished early enough for the relevant bodies to vote on their approval.) Hard Brexit, here we come.

Likewise, I don’t see any reason for the 27 to let London continue to have the same access to EU financial markets that it had when the UK was a member of the Union. Prudent bankers came to similar conclusions long ago, and indeed Bloomberg finds that plans to move people and capabilities into the remaining EU are taking concrete shape. Frankfurt and Dublin are the likeliest winners: Frankfurt is the largest financial hub on the continent, and home to the European Central Bank; Dublin is the only English-speaking alternative. (At least until Scotland joins the Union.) This was always the way to bet, and reporters’ talks at individual banks are adding micro details to the macro framework.

“Bank of America Corp., Standard Chartered Plc and Barclays Plc are considering Ireland’s capital for their EU base to ensure continued access to the single market, said people familiar with the plans, asking not to be named because the plans aren’t public. Goldman Sachs Group Inc. and Citigroup Inc. are among banks eyeing Frankfurt, other people said.”

Two Japanese institutions Bloomberg spoke with are considering Amsterdam; Morgan Stanley, local patriots, insisted that New York would gain as they and other institutions re-allocated resources away from Europe entirely. Brexit is going to put a huge dent into one of the UK’s most important economic sectors. Taking back control!

Pass the parcel

UK Foreign Secretary David Miliband provided indication today of the emerging EU strategy for dealing with the Irish No to Lisbon: it’s being left up to the Irish government to sort it out, but with a reminder of the high stakes should they choose to accept the referendum result.  Or, as Miliband colourfully put it

If you like he’s [Irish PM Brian Cowen] got to decide whether or not to apply the last rites. We’ve got to listen to his analysis of what went wrong

Yet Miliband also insisted that UK parliamentary ratification would go ahead next week, which will be hard to defend from Tory attacks that it reflects a presumption that the Irish will be talked out of their rejection, since otherwise ratification is pointless.   One wheeze floated in yesterday’s Telegraph (see also) is that Ireland would be left on the sidelines as the other 26 agreed to implement Lisbon on their own, with the Irish catch-up taking place by attaching the Lisbon provisions to an Irish parliamentary ratification of Croatia’s EU accession, whenever that happens.   But the fact that such schemes are out there is just one indication that the ministers don’t yet really have a well-laid out plan for how to proceed.

Today’s events in Ireland

AFOE readers interested in following the fallout from the resignation of Taoiseach (PM) Bertie Ahern and not familiar with the usual Irish sources may want to consult my post a couple of days ago for a little background (mostly in the Lisbon context) and then head to RTE, the Irish Times, and the Irish Election blog for continuous updates and commentary.  Bertie will be taking questions in Dáil Éireann (lower house) this afternoon (1545 BST — during the soccer) and it will be carried live here.

Will the Irish tail wag the Lisbon dog?

It’s shaping up to be an important week in Ireland for the prospects of Treaty of Lisbon ratification.   As EU-watchers know, Ireland is the only country planning to ratify the treaty by popular referendum (although events in Poland could add a referendum there too).  While the treaty should in theory have little problem passing, there’s a history of hiccups going back to the initial rejection of the Maastricht treaty by the public before they were persuaded to reconsider.  But the backdrop is getting more ominous for this one.

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Seven Down, Eight to Go

It hasn’t attracted a lot of attention, but seven of the EU-15 have now thrown open their doors to the free movement of labor from the new member states (NMS).

A bit of background: when the NMS joined in 2004, the EU-15 gave themselves the right to keep the walls up for up to seven years. The rather complicated agreement required the 15 to review their policies after two and again after five years.

Three countries — Britain, Ireland, and Sweden — decided to just admit people from the NMS. Britain and Sweden placed no restrictions; Ireland put in a modest one that emigrants would not be eligible for benefits for their first two years. (Because Ireland still thinks it’s a poor country? No idea.) Everyone else hunkered down behind walls of varying height.

So, the two-year review deadline came last month. And, lo and behold, four countries — Spain, Portugal, Greece and Finland — decided that they could live just as dangerously as the Swedes and the Brits. These four opened the doors effective May 1.

A couple of thoughts on this.
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Premature Evaluation, pt 3 (The Fatal Shore)

What to do when you haven’t finished a book but find yourself with something to say about it?

Convention dictates that one should finish a book before reviewing it (although I have my doubts about any number of published reviews), but on the other hand, The Fatal Shore, by Robert Hughes, was published 20 years ago; this is not breaking news. So out with the convention, in with the thoughts.
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More Bigtime Divergence

As people may have noted, last weekend Tobias and I were in Stockholm. One of the topics I wanted to post on but couldn’t was the latest Human Development report from the UN. There was plenty of press coverage: here, here, and here

There was even coverage in the blogs, but the tone seemed to be set by Slugger O’Toole who seemed mainly to take issue with Ireland’s rating in the HDI.

Personally I think the issues involved are much bigger than this.
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Europe’s ‘Tiger’

Last Friday Eurostat released the 2004 data on comparative per capita PPP’s (purchasing power parities) across the EU. Perhaps the most surprising fact which emerges is that Ireland is now in second place (after Luzembourg) with a PPP 40% above the EU average. For a country that not so long ago was considered one of the ‘poorer’ EU members this is truly stunning.

It is generally well known that Ireland had (and continues to have) one of the highest fertility and population growth rates in the EU, but this has not been regarded as especially important since conventional neo-clasical growth theory (and the new ‘super-duper’endogenous growth theory for that matter) argue that increased population means a bigger economy, but not necessarily an increase in per capita income. However, as I said yesterday, it’s all about population structure. What we are now understanding is that the right age structure can produce very rapid increases in per capita income, and Ireland is, of course, a good case in point.

In the case of the ‘Celtic Tiger’, New Economic Paradigm theorists David Bloom and David Canning, who have made a specific study of the Irish case, reached the following conclusions:
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