Irish need to stand up and ask euro questions
Published 26/06/2012 | 08:00
Most people have heard of the South Sea Bubble, or even the Dutch Tulip Mania. Not so many will be familiar with the Scottish Darien Scheme.
Yet 400 years later, it has taken on an unexpected resonance: a financial crash which culminated in a political union - in this case, the union between Scotland and England to form the United Kingdom.
For the record, the scheme was an attempt by a then sovereign Scotland to establish a colony called 'New Caledonia' in what is now Panama.
It was a property play on a gigantic scale, although maybe not more so than the Irish property bubble. Historians reckon around a quarter of the money circulating in Scotland was put into the scheme. Almost all of it was lost.
Then came an offer which those who had lost their money found hard to refuse. The proposal for a union of the two parliaments (in practice one parliament at Westminster with Scottish MPs) included £400,000 which would be borrowed on the English national debt, not the Scottish, and help compensate losers in the Darien scheme.
That's perhaps £400m in today's money, but far more measured as a percentage of GDP. There were also straightforward bribes, as with the Irish union almost a century later.
But even without being bribed, the Scots needed the trading and investment opportunities provided by the union in order to rebuild their shattered economy - which they did with considerable success.
Unless you're on the planet Zog, you will have spotted the connection. The euro crisis is accelerating moves towards some kind of new union between the euro members at an astonishing rate.
Academic analysts, and some political enthusiasts, have even sketched out the bones of such a union. The fiscal treaty, so recently voted upon, would become a fiscal union.
There would be a banking union, with a eurozone guarantee on deposits matched by eurozone supervision and regulation of banks. There would be eurozone borrowings, as well as national ones, giving a mixture of eurozone debt and national debts.
Not surprisingly, the creditor and debtor member states differ as to what these terms might mean. The creditors see a fiscal union as essentially replacing national budgetary policies with centralised ones. The debtors see it as having "federal" funds to be dispersed to countries in trouble.
Much the same is true of the banking union idea. The creditors want more centralised supervision of banking, but they do not want to give up national regulation.
Nor do the debtors very much, but they do want the deposit insurance fund, and most of all the availability of eurozone capital for troubled banks instead of national injections of cash.
There seems hardly even the bones of an agreement on eurozone debt, whether in the form of "eurobonds" issued collectively and traded on the markets, or some other, more technical, pooling of liabilities. In this case, of course, the interests of creditors and debtors are diametrically opposed.
Except for the common interest of saving the single currency. It is impossible now to find a dissenting voice which says the euro can be saved without some kind of union along these lines.
Everyone agrees that time is running short.
It is so short, and the dangers are so apocalyptic in scale, that there must be a possibility that some kind of a union along these lines will be formed in response to a growing crisis in Spain, the threat to Italy and, maybe, a negotiated Greek exit. The troubling thing is that, if it happens in that way, eurozone citizens will never have been asked if they actually want it.
Even the inevitable Irish referendums are unlikely to ask the question: do you wish to be part of a euro union? The really depressing thought is that the No campaigners will say this is the question, while the Republic's Government sticks to the old formula that there is really no question to be answered.
This time, the No voters will be right about the question, or questions. It is time everyone faced up to the answers.
There is the narrow question: does Ireland leave the single currency, with huge financial risks, but with the long-term prospect of a new role as an outer member of the new Europe, which is where the UK will undoubtedly be?
Or would the Republic's voters prefer the immediate stability of staying with the euro, which means being part of very different arrangements than was the case in the past? There are big long-term risks in that decision.
Could a ramshackle financial union created in an emergency evolve into something more rational, with an acceptable degree of democratic representation and accountability?
Even if one believes better political and structural systems can be put in place over time, is Ireland really ready to overcome its inflationary habits to the extent necessary to prosper in such a union?
It failed to do so in 1999. If it is going to fail again, better to do so through an increasingly worthless currency.
Signing up for the union would therefore be quite a gamble, but it raises the wider question. Does Ireland still hold to its 50-year strategy of being an outlying, English-speaking but unambiguously European state?
The strategy has served us well. Ireland's influence has been sadly diminished by the economic meltdown but a withdrawal from core Europe would leave it an impotent spectator of whichever way events unfold.
No one imagined these great questions would arise in such circumstances. The worst option, surely, would be to let others answer them for us.