‘Celtic tiger’ looks to the future with slight trepidation

Date: 20/06/1996

FEW countries could greet prosperity with such fear and trepidation.

Everything about the Irish economy appears to be booming just now. The country is top of the EU Maastricht class, with solid low-inflation growth, a controlled deficit and steady progress in casting off the millstone of long-term debt.

As things stand, only Ireland, Denmark and Luxembourg are fit and ready to join the single currency 'Euro' zone from its start date on 1 January 1999. The government means to be there from day one - and all the signs so far are that it will succeed.

True, unemployment remains unacceptably high at nearly 15&percent;, the third worst record in the Union after Finland and Spain. Yet even the jobless toll tells a success story of sorts: an economic upswing since the late 1960s changed high emigration to net immigration, leading to a baby boom.

Ireland is among the EU leaders in job creation - but it has simply not been enough to keep pace with its expanding population.

In general, Irish living standards have rocketed since the country joined the Union in 1973. At that time, per capita wealth was 61&percent; of the EU average. By the end of 1997, this figure will be over 91&percent; and is expected to equal the Union average by the end of the decade.

Much of that progress can be linked to former Commission President Jacques Delors' two structural fund packages and continued generous net transfers from the Common Agricultural Policy (CAP).

By 1999, Ireland will have received some 12 billion ecu under the two Delors' programmes in ten years. The country expects to average a total of 2.2 billion ecu per year between now and 1999 from combined CAP and structural fund transfers.

The net result will put Ireland way beyond the 75&percent; of gross domestic product per capital fixed in 1992 for priority 'Objective 1' EU aid. This, coupled with the imminent entry into the Union of the countries of Central and Eastern Europe, presages an end to the glory days of Ireland's 'Brussels' billions'.

To other member states, this must seem only fair enough. But Irish Finance Minister Ruairi Quinn, who argues that the cash from EU coffers has been important - although not crucial - to the country's impressive economic performance, will not concede that the days of significant EU transfers should end. He argues that Irish infrastructure is still far behind that of its developed partners.

Quinn can point with some justification to how effectively Union money has been used. After all, Delors used to cite Ireland as justification for the very principle of 'social cohesion'.

Others see a more important reason for continuing down the same track - a firm belief in EU 'solidarity', which helps explain the current irrational Irish fear of prosperity.

Irish Liberal MEP Pat Cox argues that Union funds have given the country's people “a confidence multiplier” to do things they would never otherwise have done.

Given the deep-seated nature of the dependence mentality in Ireland, he argues, grant incentives are worth far more than their cash value. Set against a colonial legacy compounded by poverty and isolation, EU grants spark action and their absence would lead not only to inaction, but would also risk fostering regression.

The question of farm funds closely mirrors the structural fund arguments. However, when it comes to agriculture, the political clout of 170,000 Irish farmers who - like all other European farmers - punch far above their weight, must not be forgotten. They fear the continued scaling down of the CAP, which currently yields about 1.2 billion ecu per year to the Irish economy, in preparation for the admission of agriculture-intensive Eastern European states to the Union.

These twin economic threats present Dublin with an enormous challenge.

Ministers are realistic enough not to oppose Union membership extension eastwards - with less than 1&percent; of the current Union population in a country which in 1995 took back four times more cash than it put into Brussels coffers, they know that approach is a non-starter.

So Foreign Minister Dick Spring is loud in support of reaching out to the East. But Brussels diplomats will have clearly noted the appended warnings about the need to maintain farm and structural funds. Irish ministers' and officials' doggedness in fighting vital national interest battles is not often seen. But when they decide to dig in their heels, they can be extraordinarily belligerent.

Great though the Brussels challenge is, however, the bigger fight must be waged at home.

Ireland's centre-left coalition government has to convince the country's 2.5 million voters to persist with moderate wage demands, work more efficiently and sell more abroad. Through this they must promote the idea that the Irish people must rely chiefly, if not solely, on themselves. Like all things virtuous, this political message has a rather limited popular appeal.

There are already disquieting signs of trade union restiveness similar to that experienced in France and Germany, and Quinn and his colleagues will have their work cut out to maintain the country's record of tough financial management which has brought considerable rewards over the last decade.

But when, and if, that is done, they must still confront residual international scepticism about the real strength of this so-called 'Celtic tiger' economy.

Money markets still identify an over-dependence on Brussels transfers, weak longer-term investment and a large trade dependence on the Eurosceptic UK in the run-up to the start of economic and monetary union.

However, not all of Ireland's future fears about the EU are economic. At the Intergovernmental Conference, Dublin needs to ensure that it retains a full Commission seat in any future structural changes. As a small country nominee, the Irish Commissioner bears an even bigger onus than most to keep a weather eye on things for the folks back home.

Within Ireland, the Commissioner has the kudos of a senior government minister. The position carries considerable psychological weight with the Irish, who are justifiably proud of the contribution made by Commissioners such as Patrick Hillary, Peter Sutherland, Ray MacSharry and now Pádraig Flynn.

Dublin has identified this as the bottom line in the IGC talks and is prepared to concede some ground over the issue of the weighting of votes in the Council of Ministers to ensure it gets its way.

It also needs to ensure that changes in the common foreign and security policy (CFSP) do not force it into a fundamental sea change in Ireland's traditional military neutrality.

In its first-ever foreign policy blueprint this year, the government indicated its intention to join the NATO Partnership for Peace programme and signalled increased cooperation with the Western European Union (WEU), where it has observer status - although largely for relief and humanitarian missions.

But neutrality must stay - for the time being at least - even if the reality is that the world circumstances from which it evolved back in 1939 have changed beyond all recognition.

To this end, Ireland will be relying on the cross-cutting IGC demands of other member states cancelling each other out.

The government also feels much more comfortable with three fellow neutrals - Sweden, Finland and Austria - joining them at the talks table.

Clearly, the challenges for this rather fretful Celtic tiger abound. But they must be set against a mood of near-irrepressible buoyancy amongst a predominantly young, educated and skilled population.

Amidst all these challenges and travails, the overwhelming majority of Irish people both implicitly and explicitly accept that their destiny lies with the European Union.

John Downing is European editor of the 'Irish Independent'.