The Country That Said Yes

Article excerpt

Ireland, from inside the euro-zone, is booming. As inflation soars and wage pressures grow, are there any regrets?

The Republic of Ireland, firmly inside the single currency, has done terribly well out of Europe. It is the most outstanding example of material success in the rich world. It is growing by something between 7 and 9 per cent a year. Its unemployment, at around 16 per cent in the early 1990s, is now less than 4 percent. It scours the British Isles for more labour. Each Sunday, the ferry from Hollyhead to Dun Laoghaire is full with workers from Wales, going to spend a week working in Dublin -- a reverse of the pattern that prevailed for much of the past century. Ireland now "imports" a net 20,000 people a year, many of whom are returning exiles.

Dublin house prices now reach London levels -- and even, in some areas, exceed them. Inward investment, especially from the United States, continues to boom: among the attractions are low corporate taxation and an increasingly skilled workforce, in whose education, especially computer skills, the government has invested strongly. The country, with a population of 3.7 million, has one-third of Europe's bandwidth capacity and more than one-third of its inward high tech investment. The Dublin-based Baltimore Technologies is one of Europe's most successful software houses, buying up companies in the UK and on the Continent at the rate of one a month. The Massachusetts Institute of Technology sited the European centre for its MediaLab -- the most famed high tech laboratory in the world -- in Ireland. Nicholas Negroponte, the lab's director, commended the country for its "great respect for madness". If he was confirming, in a new guise, an old stereotype of anarchic Irishness, he was also endorsing it as a postmod ern attribute.

But there is a cloud on the horizon. Ireland's inflation rate has zipped upwards, from less than 3 per cent in the spring to between 6 and 7 per cent now, the highest in the European Union. Patrick Honohan, an economist with the Economic and Social Research Institute in Dublin, says that the fall in the value of the euro against the pound and the dollar is largely to blame. "Ireland," he says, "is the most open economy in Europe. It trades mainly with the UK and the US. So its import bills have just soared." So long as the euro remains weak, the problem will continue. The pressure is increased by the sheer momentum of the economy. Labour shortages mean that employers actually want to pay more, and they were already quietly breaking the terms of the agreement. High company profits and low company taxation make an easy case for higher wages.

Has this caused Ireland to cool on Europe and to see a case for Euroscepticism, as many Eurosceptics in Britain (another open economy) hoped it eventually would? It may seem so, since Sile de Valera -- the arts minister and granddaughter of Eamon de Valera, the dominating force in Irish prewar politics -- told an audience in Boston in September that "the EU is not the cornerstone of what our nation is ... we have found that directives and regulations agreed in Brussels can often seriously impinge on our identity". Mary Harney, the deputy prime minister and leader of the economically liberal Progressive Democrats who are Fianna Fail's (small) coalition partner, claimed that Irish commitment to Europe was not a commitment to the kind of Eurofederalism proposed by Joschka Fischer, the German foreign minister. "We have created jobs because we kept control of our own taxation policies," says Harney. "I do not want to see a situation in Ireland where we have to import the kind of job-destroying policies that are k eeping millions of people on the dole across Continental Europe."

But this debate is itself a sign of self-confidence: no public figure would, until now, have thought of criticising a union that had given so much money (although the money is tapering away, Ireland is still a net gainer from EU structural funds), and so many opportunities for international prominence, to the new Ireland. …