The credit crunch has had quite different effects in Northern Ireland and the Republic, says John Coulter
IRELAND’S credit crunch has become a tale of two economies. The southern is one on the verge of total collapse, Many of those dependent on its northern counterpart are thankful it is still part of the United Kingdom.
The global downturn has skinned the Republic’s “Celtic Tiger” economy alive, leaving it in such a precarious financial state that it is expected to shrink by a further 8 per cent in the next 12 months. It is even doubtful that the Dail’s emergency budget can halt either the Republic of Ireland’s slide into virtual bankruptcy or the chorus of demands for a general election.
Fianna Fail finance minister Brian Lenihan has rammed up taxes and slashed public spending in a bid to prop up the rapidly shrinking economy. His majority coalition may succeed, but at a price which could see a coalition of Fine Gael and Irish Labour sweep to power at any snap election in the Republic.
In 1969, convoys of cars abandoned Northern Ireland for the Republic as the former became increasingly immersed in the sectarian slaughter known as the Troubles. Four decades later, the convoys are still rolling – but in the opposite direction, as thousands of shoppers pour across the border into Northern Irish towns and cities on shopping sprees. The strong euro in the Republic, coupled with the weak pound in the north of Ireland, is transforming the latter’s shopping centres into a consumer paradise for southern shoppers.
The County Down city of Newry is entitled to ask: “Recession? What recession?” In the 1970s and ’80s, Newry was regarded as the murder capital of the island of Ireland. Bombs and bullets had made it into a virtual economic wasteland. Now the credit crunch has converted the city into one of Ireland’s most prosperous areas. And Newry is indicative of how Northern Ireland could survive the worst effects of the credit crunch. Just outside the city is a network of dual carriageways and motorways pointing southern shoppers in search of bargains ever deeper into the north.
Well before the financial meltdown and even before the establishment of the power-sharing Assembly at Stormont, it was estimated that a united Ireland would cost taxpayers in the Republic some £9 billion a year. Now the economic downturn has put talk of a united Ireland on hold for the foreseeable future, but also increased the language of cross-border co-operation. Once hated enemies are now firm friends as delegations of Unionists and republicans urge Gordon Brown to ensure that any cuts in funding to Stormont are kept to a minimum. The power-sharing executive’s trump card is the threat from the various terror factions which make up the dissident republican movement. The killing of two soldiers and a police officer by the Real and Continuity IRAs precipitated a degree of cross-community unity not seen since the 1998 Omagh bomb massacre.
If the Unionists box clever, they can use the Republic’s financial misfortune to demand a bigger say in the running of various cross-border bodies and so exercise an increasing influence on Dublin.
The threat of more years of political instability prompted Northern Irish voters to bring the Democratic Unionist Party and Sinn Fein in from the cold at the 2007 Assembly election and put them in charge of the executive. Moderate nationalists and Unionists in the SDLP and Ulster Unionist/Tory alliance now have to convince people that they can provide a workable alternative to the current DUP/Sinn Fein government – without causing a southern-style economic collapse.
Northern Ireland is suffering considerable job losses and rising costs, but the recession is biting deeper south of the border.
Meanwhile, both the north and south of Ireland are afflicted by rising crime and its consequences. In the Republic, almost as many people are dying in gangland feuds as in there were in Northern Ireland at the height of the Troubles. In the north of Ireland, there is a real danger that racism could become the new sectarianism. Many migrant workers are choosing to remain and ride out the recession. In contrast, in the Republic, the attitude of migrant workers’ seems to be: “Abandon ship”.
However, even if the north can see out the recessionary storm, it may not have a large enough pool of home-grown workers to rebuild the economy. Throughout the Troubles, the north suffered from the so-called brain drain – when Northern Irish students would travel to Britain for higher education and remain there.
If the Republic does not deteriorate even further and North Ireland can contain the dissident republican terror threat, then the island as a geographical entity can be rebuilt economically. In the meantime, talk of a united Ireland by 2016 – the centenary of the ill-fated Dublin Easter Rising – is no more than empty rhetoric. And so is the laughable notion of a Unionist-dominated independent Ulster. What is beginning to emerge as a possible economic way forward is to give the United Kingdom a bigger say in the Republic’s internal financial affairs. Economic downturns can create all sorts of new and unlikely bed fellows. So talk of the union flag fluttering over Dublin Castle and Leinster House may not sound quite as daft in 2009 as it did when it was first suggested in 2000.
The immediate political effects of the recession on both parts of Ireland will be seen in the results of June’s elections to the European Parliament.
In the Republic, the ruling Fianna Fail and Green Party coalition is expected to taking a hammering, leaving Taioseach Brian Cowen with the mother of all political migraines if he is forced to call a general election.
In the north, the European poll is likely to become a referendum on the DUP/Sinn Fein power-sharing coalition.
The rapid deterioration in the Republic’s economy could also have a major impact on the expected re-run of the Republic’s referendum on the Lisbon Treaty, which was narrowly rejected in the first ballot
Europhiles in Brussels and Strasbourg might be tempted to scrape the bottom of the euro barrel to try to get more grants for the ailing Celtic Tiger – a tactical move only intended to encourage the Republic’s voters to back the treaty.
If Cowen’s government cannot reverse the economic slide, voters may deliver another political body blow to Fianna Fail by again rejecting the Lisbon Treaty – a move that would leave the Republic completely isolated in the European Union.
And, if the DUP and Sinn Fein both lose significant votes in June, that is likely to add momentum to the UUP’s new alliance with David Cameron’s Tories.
If Cameron trounces Brown at Westminster’s 2010 general election, that would place Ulster Unionists in a prime position to be part of a Tory administration – a role they have not enjoyed for almost a century.
Before the credit crunch, the governing parties in both parts of Ireland enjoyed seemingly unassailable leads in the opinion polls. June’s elections will show if the recession has done to those leads what it is done to stocks and shares – wiped them out. The recession has created an ethos of “short change”; its political impact is likely to one of “all change”.
