Small countries' position in the European Union has been examined on these pages from many perspectives. In the previous issue, Esko Antola asked what kind of union would best serve small states. In this article, Paul Gillespie analyses how Ireland's EU debate can throw light on the more general picture of how the EU should develop.


Ireland's strategic choice in the EU

By Paul Gillespie

Ireland has reached a critical moment in its relations with the European Union following rejection of the Nice Treaty by the Irish electorate in last June's referendum. Much that was taken for granted over the first generation of EU membership is being questioned, including Ireland's core interests and basic positioning as a small state within the system of collective governance now emerging. This has to do as much with a rapidly changing national scene as with the unsettled nature of the European Union itself. Ireland's debate can throw light on the more general picture of how the EU should develop, since it concerns issues such as political accountability and destination that animate political elites and electorates throughout the member-states. How it is resolved will also concern them directly, in that the Nice Treaty to enable EU enlargement cannot legally survive another referendum rejection here.

In his article in the last issue of Polarities, Esko Antola usefully distinguished three groups among the existing small member-states as to their views on finalite and their strategic political preferences. As he recognises, small states do not constitute a coherent group of EU members; but their weight rests on their relatively great number when the basic structures of decision-making and representation come up for negotiation. Sweden and Denmark he described as "euro-sceptical", favouring an inter-governmental union, preservation of national sovereignty and the value of the veto. Belgium, Luxembourg, Portugal and Finland are at the other extreme, favouring strong institutions and a communitarian, federalist approach. They see that supranational institutions secure the influence of small states better than purely inter-governmental structures. The third group is more disparate. It includes Ireland with a very clear focus on structural policies and neutrality, and the Netherlands, which has recently distanced itself from the institutionalist group after becoming a net contributor, with a key interest alongside Germany of not increasing the common budget and an ambiguous identity after being newly differentiated from Belgium in terms of voting power in the Nice Treaty. 

The comparison between Ireland and the Netherlands is instructive and worth further comment. During the 1990s the Netherlands suffered a series of shocks which caused its government to re-examine basic interests and how it conducted EU business. As a result of the 1992 Delors II package the country moved from being a net beneficiary to a major per capita contributor, leading its finance ministry to adopt a very negative attitude to new expenditure programmes. In 1991 the Dutch presidency's federal draft treaty for Maastricht was rejected. In 1993-4 Mr Ruud Lubbers failed in his bid to become Commission President. And in 1996 the Dutch found they had to change some 350 product specifications after an adverse ECJ verdict. As a result of this accumulation of shocks the government put in place a strong committee system to give renewed coherence to its policy-making, which is normally segmented because of  coalition government and departmental autonomy. Overall, the Netherlands' policy and preference profile has changed substantially over the decade. *

 

Ireland's share of shocks

Ireland too has had its share of shocks in the recent past. The referendum result is central, a profound jolt to the political class and the government, which ran a careless and complacent campaign based on the assumption that previous commitments to Europe and the prospect of benefiting from enlargement would overcome dissatisfaction with individual elements of the treaty. In the event it was rejected by 54 % to 46 % on a 35% turnout, at least ten points down on what was expected. Far from representing a massive swing against the EU, the No vote was actually down by 2.6% (48,902 votes) on the Amsterdam referendum in 1998; in comparison the Yes vote was massively down by 18.1% (666,976 votes). It is estimated that of those who voted Yes in the Amsterdam referendum (held on the same day as the referendum on the Belfast Agreement) 53% abstained on Nice, whereas only 36% of the No vote did.

There was some movement from Yes to No, and a smaller amount in the other direction.

That differential abstention is what really needs to be explained in the result. It echoes a substantial disenchantment and disconnection with the political process and elite, arising from a series of tribunals into corruption. It reflects dissatisfaction with the short campaign, the amount of information made available and the poor standard of public debate on the issues, especially by those on the Yes side. The Government's campaign was half-hearted and unconvincing, that of the other mainstream parties in favour hamstrung by their failure to spend money and effort on it in anticipation of a general election to come and a series of Supreme Court judgements stopping the Government using public funds to support the Yes side. In comparison the disparate band of No campaigners, including nationalists, narrow sovereigntists, the religious right, Greens and those who believe Ireland's military neutrality is threatened by the Rapid Reaction Force mounted a passionate campaign drawing on popular fears of a loss of power, sovereignty, representation and democratic accountability — and the danger that enhanced cooperation will issue in a two-tier Europe. There were few voices heard on the more critical federalist side of the argument, saying that the treaty's shortcomings arise from its unduly inter-governmentalist bias.

On top of all that there was a marked uncertainty among voters about the longer term implications of the treaty, leading on to the 2004 IGC — about finalite, that is — and a desire to call a halt to allow them to be spelled out more clearly and debated more thoroughly.

That has inspired the Government to create a Forum on Europe, drawing in all the political parties represented in the Irish parliament as well as the extra-parliamentary parties and groups that campaigned so effectively against the treaty. Despite the refusal of the main opposition party, Fine Gael, to participate, the forum will meet between now and the Laeken European Council in December to draw up an agreed report on how to proceed with the Nice Treaty and to begin the more long term debate on the future of Europe required by the 2004 agenda. Academic, corporate, trade union and other interest groups will be invited to participate, thereby, it is hoped, creating a public momentum that could carry over into another referendum on Nice to be held after the general election next year. The Government's attitude towards negotiating special declarations or protocols will also be determined by the forum's proceedings in coming months.


Basic interests are at stake

A substantial effort is promised to mobilise and enervate those who abstained last June and to convince them that basic interests are at stake. Analysis of the results showed a peculiar insouciance among sections of the middle class, a feeling that they could vote against the treaty with impunity. Since then there has been a growing realisation that such basic foundations of recent Irish economic success as US foreign direct investment are predicated on full participation in the EU and would be jeopardised if Ireland is marginalised by voting the treaty down a second time. Membership is not a scaffolding to be cast aside now that average European income levels have been attained and the flow of net transfers is coming to an end. Against that, however, there was a widespread feeling that this was the first treaty coming without financial strings attached, allowing for a more disinterested examination of its destination. If the Government does not respect this feeling and if voters sense an arrogant disregard for the decision reached in June they would be disinclined to vote Yes a second time. This recalls Brecht's remark that if the people vote incorrectly it will be necessary to dissolve them and select another one.

During and after the referendum campaign divisions of opinion about that destination surfaced within the Government. It is clear in retrospect that these were playing as undercurrents with significant sections of the voters and reflect Ireland's changing interests and positioning as a small state. Three major themes predominate. The first draws on issues raised in a basic choice posed for Irish voters by the deputy prime minister, Ms Mary Harney, leader of the Progressive Democrats, a neo-liberal junior partner in government with Fianna Fail. The second relates to the debate on inter-governmental versus federal models of integration. And the third relates to issues of identity arising from the pooling of sovereignty and increased use of qualified majority voting.

Ms Harney spoke in 2000 of her support for a Europe of independent states and not a United States of Europe. Her principal fear was that Ireland would be drawn into a web of over-regulation centred on Brussels, which would jeopardise the distinctive developmental model she believes has made the Irish economy so successful. In many key policy-making respects, she said, Ireland is closer to Boston than Berlin. That soundbite — Boston or Berlin — has caught on as a summary of choices facing the country now that personal incomes have caught up with the European average, but basic physical and social infrastructures lag substantially behind — largely as a result of the low tax, low spend model Ms Harney and an important section of the Fianna Fail party espouse.

This chimed in with another shock encountered by the Irish Government over the last year — sharp criticism of its budgetary strategy by the European Commission, culminating in an unprecedented reprimand last February that the December 2000 budget abrogated agreed guidelines on inflation. The reprimand was rejected by the Minister for Finance, Mr Charlie McCreevy, an ideological ally of Ms Harney. Irrespective of the merits of the case — and there are good arguments on both sides, given the economic downturn and the increasingly inappropriate emphasis on strict budgetary balance in the EU's Growth and Stability guidelines — it would be a mistake to underestimate its impact on the Irish electorate, especially on the volatile middle class voters who disproportionately use their ballots.

 

Image of large states

The image of large EU states bearing down on Ireland's economic model was reinforced by the emphasis put on taxation in the Government's approach to the Nice Treaty negotiations. Preventing taxation issues moving to qualified majority voting was top of their agenda. The policy was informed by repeated reference to harmonised taxation from social democratic French and German leaders, in the context of managing the eurozone and creating a European model of social solidarity. To Ms Harney and Mr McCreevy this sounded like the imposition of social democratic norms through Brussels (and it should be remembered that the Irish government was for several years in a small minority of centre-right ones within the EU). In his ambitious speech on the future of Europe made on May 28th 2001 (suspiciously close to the Irish referendum to constitute interference muttered several Irish ministers in the hearing of their supporters), Lionel Jospin put it like this:

"We must finally take action to stop any behaviour detrimental to the general European interest. Combating 'tax dumping' is one immediate priority; it is nor acceptable for certain member States to practice unfair tax competition in order to attract international investment and offshore headquarters of  European groups. Ultimately, the corporate tax system as  a whole will have to be harmonised… Economic cohesion must serve social solidarity… Working conditions must be harmonised upwards… We must aim for a European social treaty."

One of the key instruments used in Irish public policy to attract strong flows of US foreign direct investment has been a 10% tax on corporate profits exported from such companies. In 1996 the Fine Gael-Labour-Democratic Left rainbow coalition negotiated an agreement with the Commission to allow this rate to be standardised across the corporate sector at 12.5% by 2003. The political class is therefore committed to it as an objective. Fears that it might be circumvented at Nice or through the new enhanced cooperation mechanisms certainly played into the referendum campaign. French and German leaders worry that the Irish example will be used by the accession states, further undermining tax dumping competition.

Here, as in the Netherlands, the finance ministry's views determined government policy. There are inadequate mechanisms of horizontal and vertical management within the government system to subject lead departments to more rigorous analysis and assessment compared with competing priorities, such as maintaining Ireland's position within the mainstream of European integration, where it is less isolated and more capable of finding allies in adversity. This failure within government tended to be reinforced in public debate. It will be further reinforced as Ireland makes the transition to net contributor status, probably by 2006 when the budgets are next to be examined. But next year the mid-term review of Agenda 2000 gets under way. That is likely to coincide with the opening of the next WTO trade round, in which agricultural subsidies and the future of the CAP will be on the agenda.

 

Ireland in transition

Ireland is in transition away from the heavy emphasis on structural funds and agricultural transfers that marked its first generation of EU membership. Politics increasingly obtrudes on economics and diplomacy. The government has not adequately prepared its public for that shock, despite a series of speeches by leading ministers on the theme that "the EU is not them, it is us", the importance of the single market and currency for Ireland's development and the opportunities opening up for an economy which many of the accession states regard as a model for their own development. This showed up in the heavy abstention or No vote in the referendum among agricultural constituencies. The Government failed to demonstrate the benefits of EU enlargement to a sector already afflicted by the foot and mouth and BSE effects on cattle prices and fearful of competing demands for resources.

The second issue aired by dissident ministers was the future model of a more integrated and enlarged European Union. The attorney-general, Mr Michael McDowell, speaking shortly after the referendum, delivered a broadside against federalist plans, advocating instead a "Partnership of Member-States". He put forward a checklist of indicators drawn from recent discussion about the future of Europe by which it is possible to recognise state-like entities. Germany loomed large in his discussion, as an emerging hegemon dominating the new statelike entity. He assumes a zero-sum outcome between EU and national competences across the span of his checklist, in which sovereignty and identity are transferred, not shared.

The third issue raised by these ministers concerned identity. Speaking in Boston in September 2000, the Minister for Arts, Heritage, Gaeltacht and the Islands, Ms Sile de Valera, said "directives and regulations agreed in Brussels can often seriously impinge on our identity, culture or traditions". She was irritatingly vague about which ones she had in mind; but her remarks resonated within the campaign among some of the right-wing and Eurosceptic elements on the No side.

One of the principal campaign slogans to be found on No posters throughout the state proclaimed that "You will lose power, influence and money" by voting for the Nice Treaty. An extremely persuasive case can be made that the very opposite is true of Ireland's membership. Up to now the State has swum in the mainstream of integration, even in its vanguard, and has handsomely benefited economically and politically. The £26 billion of transfers have been well used to develop the country's human capital resources. For a small state dominated by a large neighbour sovereignty-pooling has been something of a liberation, enabling Ireland to diversify its trade and diplomacy away from over-dependence on the UK. The recognition of  Ireland's multiple identities has encouraged awareness that the country is now highly internationalised and has been so for a very long time.

These realities have not fundamentally changed. But they have to be renewed in different and changing circumstances. There is a genuine fear of losing influence through the loss of Commission representation (although the government took the initiative on strict rotation with the Dutch government). There is a need to discuss the political case for closer integration much more fully. There are also worries about how the development of the EU's Common Foreign and Security Policy will affect Ireland's military neutrality — although in opinion polls solid majorities believe neutrality is quite compatible with participating fully in the Partnership for Peace and the Rapid Reaction Force. The political agreement in Northern Ireland has facilitated more normal relations with the UK, removing resistance to some of its Eurosceptic mindsets (although not to the extent of changing positive attitudes towards the euro).

As Esko Antola said, size as such is not the decisive factor in member-states' coalitions in decision-making situations. Cleavages such as the North-South divide, the inter-governmental/federal split or divisions between conservative and social democratic governments are more important than those between small and large states. Several of these cleavages run through the Irish debate on integration, which is best described as transitional, reflecting change at national and European levels. It would be a mistake to judge them only by the Nice referendum result, which is likely to be revisited. But Ireland certainly faces a crucial strategic choice: between a more integrated and constitutionalised Europe in which it would find common cause with the institutional group of smaller states such as Belgium, Finland and Portugal, or between the more eurosceptic group centred on Sweden, Denmark — and the United Kingdom. How it chooses will be a central part of its domestic politics in the next few years.

September 26th, 2001

Paul Gillespie is Foreign Editor of The Irish Times (pgillespie@irish-times.ie). His edited volume, Blair's Britain, England's Europe, A View from Ireland, was published last year by the Institute of European Affairs in Dublin. With John Palmer of the European Policy Centre he is the author of The Mission and Values of the Europe We Need, a document arguing the political case for closer European integration in an increasingly interdependent world (www.theepc.be). 

 

* These details are taken from Brigid Laffan, Organising for a Changing Europe: Irish Central Government and the European Union, Studies in Public Policy: 7, Dublin: The Policy Institute at Trinity College, Dublin, 2001, pp. 80-83. The study examines how the Irish Government handles EU affairs, and contains a revealing comparison with the Netherlands and Finland.

 

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