What do Battersea Power Station, Claridge's hotel, the Citigroup Tower in Canary Wharf and the Bond Street home of royal jeweller Asprey have in common? Answer: they were all bought by Irish property investors at the height of the Celtic Tiger boom. Those were the heady days at the start of the 21st Century when the Irish loved to boast they were richer than their former masters, the British - richer even than Germany - and the Economist ran a cover story calling Ireland ‘Europe’s shining light.' Today swaggering Ireland has gone bust. Spectacularly, dramatically, perhaps irretrievably bankrupt, suffering the deepest recession in the world. But, tempting though it might be, Britain should not feel any sense of pleasure at Ireland’s humiliation because, as I shall explain, Ireland's crisis could well end up costing families in Britain dear. So what went wrong? No one in Brussels will ever admit it, but it's the euro that ruined Ireland. Ireland joined the single currency in 1999. At the time it was enjoying healthy growth, fuelled by investment from high-tech multinationals such as Dell, Intel and Pfizer, attracted by Ireland’s low 12.5 percent rate of corporation tax. But after the Irish turned over their currency and their interest rates to the European Central Bank in Frankfurt, things began to change. The ECB insisted upon low interest rates for the eurozone to help the sluggish German economy. But what suited Germany was all wrong for Ireland, turning healthy growth into a debt-fuelled property mania. First the Euro-enthusiasts across the EU fostered the idea that, since all the members of eurozone shared a single currency and had promised to adhere to strict limits on debt and inflation, they were all equal in risk. This fiction led investors to imagine lending to Greece or Ireland was no more risky than lending to Germany or the Netherlands. So Irish banks were free to suck in billions from Asia and Europe. These billions - many of which came from the City of London - were what fuelled Ireland’s asset bubble. ECB policy made sure the money was lent on to Irish property speculators at real interest rates that were actually negative. So in 2007 Ireland built half as many houses as Britain, which has more than 13 times its population. Waves of immigrants arrived from all over the world, flying in to work in the booming economy which one Irish prime minister promised could only become ‘boomier.’ For the first time since the potato famine of the 1840s, the population of Ireland began to grow. Believing him and eager to cash in on ever-soaring property prices, the Irish began a credit binge that drove up levels of personal debt to the highest in Europe. Meanwhile the Irish Government enjoyed a tax revenue bonanza - and responded by letting public sector pay and spending rip so that today Ireland has the highest paid public sector in Europe. In short, joining the euro has meant almost everything that could go wrong in one country has gone wrong in Ireland. Then in 2007, the inevitable happened and the property bubble burst. Tracts of land bought for hundreds of millions of euros for commercial development became worthless overnight. House prices crashed to half their value and are still falling. The Irish countryside is now littered with 2,800 ‘ghost estates’ - populated with 43,000 flats and houses left empty or unfinished. Irish banks have been destroyed by their bad loans and are insolvent. The bond markets will not lend money to the Dublin government, which is itself insolvent, driven to the edge of bankruptcy by trying to save the banks. One economist pointed out last week the markets now put Irish sovereign debt in the same risk group as Ukraine and Pakistan. And all this could have serious repercussions for Britain. The Wall Street Journal warned last week about a connection between UK banks and their exposure to the increasingly dodgy-looking debts of eurozone countries such as Ireland: ‘Sterling is about to be snagged by the euro.’ Banks here were the biggest lenders to boom-time Ireland. Their exposure was recently calculated at £143bn. RBS alone has a £53.3bn loan book in Ireland. Worse, Irish bankruptcy could lead to a contagion of default on debt among the other weak members of the eurozone. Such a contagion could put the banking system here under serious threat, especially if the Spanish were forced into default. Exports would be hit, too. Ireland takes seven percent of Britain’s exports, making it a far more important market than China. But a contagion across the eurozone would hurt more than just exports to Ireland. The European Union takes 60 percent of British exports. What's more, European observers warn that if Ireland turns to the EU for a bail-out, Britain may be forced to help in the rescue. The European Financial Stability Facility (EFSF), the rescue fund established by the eurozone countries last May after the Greek crisis, is meant to be funded only by members of the single currency. But money for Ireland will also come from the International Monetary Fund, to which Britain contributes, and from European Commission funds, which also include funds from every member state. If Portugal, Spain and Italy also turn to the EFSF, the facility could be overwhelmed. If that happens, Brussels will expect every country of the EU, including Britain, to contribute billions to bail-out the insolvent eurozone member states. A bail-out for Ireland now looks inevitable. While Britain’s national deficit – the amount by which Government spending exceeds annual revenue -- is about 10 percent of national output (called GDP), Ireland’s is 32 percent, possibly the highest in the world outside Zimbabwe. Ireland’s debt-to-GDP ratio could hit 140 percent by 2012, near the same the level at which Greece was pushed over the edge earlier this year. Yet last week George Papaconstantinou, the Greek finance minister, insisted that his country was in better shape than Ireland because ‘it doesn’t have banking stability problems.’ Mr Papaconstantinou was right. The Irish government has recently admitted their decision to bail-out the banks and protect foreign investors from default on the banks’ bonds will cost the Irish people E50bn – about £42bn. But independent economists put the final cost at £60bn. The £42bn-plus cost of the Irish bank bail-out will fall on a tiny population of just 4.5m, about the same as the East Midlands. The bank-bail out burden will be near £29,000 for each household. Many of those households are already in negative equity and struggling to pay mortgages taken out in the boom times. Economists calculate that one in eight mortgages is now ‘under water.’ Worse, unemployment is high, with the rate of unemployment held under 14 percent only because people are fleeing the dole to look for work in Canada, Australia, America and Britain. So it turns out that, despite everything, Britain does owe a debt of gratitude to Gordon Brown. This country came within a whisker of joining the single currency. Had the decision been left to Tony Blair and Peter Mandelson Britain would have joined at the same time as Ireland. But Gordon Brown would not let Britain abandon the pound. As another former Chancellor, Lord Lamont, said last week: ‘If we’d been in the euro, we would have had an even bigger boom and bust in the housing and banking sectors.’ One can only look at Ireland today and say, ‘There but for the stubbornness of Gordon Brown – and the independence of sterling -- goes Britain.’ But last night in Berlin, Van Rompuy showed what he really is. And that is, a dangerous, cynical man who intends that all of Europe should be turned into a vast version of Belgium, an invented country called Europe where the loyal feelings and patriotism of the ancient nations are suppressed -- all replaced with a European nationalism. Last night Van Rompuy gave a speech in which he condemned 'the danger of a new Euro-scepticism. This is no longer the monopoly of a few countries. In every member state, there are people who believe their country can survive alone in the globalised world. It is more than an illusion. It is a lie!' [Note, I can't think of any state in the world outside Burma and North Korea that imagines it can survive alone. What Van R is attacking is any country and any people who imagine they are equipped to run their own state without an undemocratic superstate being in control. Damn shocking, those Swiss.] 'The biggest enemy of Europe today is fear. Fear leads to egoism, egoism leads to nationalism and nationalism leads to war.' 'Today's nationalism is often not a positive feeling of pride in one's own identity, but a negative feeling of apprehension of others.' Tripe. And I have to call it tripe, because in Brussels, 'nationalism' is not nationalism as we understand it. The word is used instead to mean any expression of rational self-interest by one country. It is used to mean any preference by any citizen for their own homeland or culture or political system over others. Remember, the European Commission is the institution in which its employees are trained never to mention their own home countries if the word can possible be avoided -- British eurocrats are trained not to say Britain but to say only 'the country I know best.' This is why the EU has rigged up the idea of dividing Europe into 'regions' which ignore, indeed, erase, national boundaries. This is why, under law, we are all called 'citizens of the EU' now. It's not just a gesture, it's a fact, and cynical creatures such as Van Rompuy means we should all become 'citizens of the EU' in every sense. WE can't say we weren't warned. The day after Van Rompuy was appointed, Paul Belien, a Flemish historian and lawyer, warned readers of the Mail that the newly powerful president of the council was a man 'devoid of patriotism and contemptuous of democracy.' Belien has known and observed Van Rompuy since the mid-1980s. He called Van Rompuy 'a shrewd manipulator, he will do all in his power to further EU integration.' 'Van Rompuy is a product of the debased, corrupt political life of Belgium. Like the EU, it is an artificial construction, the result of political compromise and experiment.' 'Because of this lack of real nationhood, Belgians despise their own state. But this unpatriotic attitude is precisely the reason why Belgian politicians have been so enthusiastic about the EU, in which they see the mirror image of their own fraudulent, unprincipled country.' Which is to say, Van Rompuy is precisely the man to lead the Belgianisation of Europe. Make no mistake, the EU is an empire with global ambitions. It was no mere gesture that in his acceptance speech as president of the council, Van Rompuy extolled 'global governance.' Pay the man the compliment of believing he means what he says. And then be prepared to treat him as the dangerous, cynical anti-patriot he is. But the idea itself, of the British and French fighting together, is not so easily dismissed. Or at least, no so easily dismissed among some senior army officers whom I would normally expect to be infuriated by yet another Cameron surrender to the EU grand project. Many in the British military wanted some sort of pooling of forces years ago but the Gaullists in France would have none of it. As for mixing with Nelson's enemies, there is that betrayal to consider. But there is this, too: that there is a long history of distinguished soldiers from these islands fighting for the French against the forces of the British Crown. Just ask any Irish Guards officer. If it's late enough, and if the dinner's been good enough, he will start quoting Kipling's 1918 poem, The Irish Guards: 'We're not so old in the Army List, But we're not so young at our trade, For we had the honour at Fontenoy Of meeting the Guards' Brigade.' Kipling's poem goes on '...We're not so old in the Army List, But we're not so new in the ring, For we carried our packs with Marshal Saxe When Louis was our King. But Douglas Haig's our Marshal now And we're King George's men, And after one hundred and seventy years We're fighting for France again!' Fighting for France is no problem. Fighting alongside France is no problem. But pooling into an EU army to fight for the European superstate, this wretched 'legal personality' created by the Lisbon Treaty, the treaty embraced by Cameron and Hague? That would be surrender. And worse. 
14 November 2010 8:25 AM
First the potato, now the euro: how Ireland has been destroyed again
10 November 2010 2:34 PM
Van Rompuy: more dangerous than he looks
09 November 2010 1:03 PM
For another king, another country
Sunday, 14 November 2010
Shabby and secret dealings between member states last year made Herman Van Rompuy president of the European Council. At the time, he was mocked in Britain largely because he was unknown, mouse-like and, well, Belgian.
This deal of British and French forces pooling their (ever decreasing) military and naval powers is a stinker. We know that. We know that it is just another step towards an EU army.
Pause for a note for those of you educated in the modern style of history teaching at British schools (ie, just Tudors and Nazis): Fontenoy was the 1749 French victory of Louis
XV's forces (that's Louis, above) led by Marshall Saxe (that's Saxe to the right) over the Duke of Cumberland's army. Six battalions of the Irish Brigade fought for the French king.
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