Thursday, 19 May 2011
A Day At The Races
Had Her Majesty, Queen Elizabeth, visited the Republic of Ireland a decade ago her speech writers would have put in many fine words about the wonderful prosperity, the “Celtic Tiger” and the happy future that was to be. This week she will be avoiding economics and I think sticking to horses, notably at the Irish National Stud.
The question she asked at the LSE in 2008 to the effect that why didn’t all those experts see the crash coming would be much too sensitive. Given the way that Dublin finance was embroiled with the City of London it would open too many sores.
Also, the row this week over the bust Bank of Ireland and its UK banking license and who is liable for what does not help. That the Post Office Savings bank with all those British Army accounts is involved adds to the whole affair.
How “independent” has the Republic been since 1922? It depends how you look at it. Certainly, it has had some freedom of action and decision. But the economy has been a different matter. The currency, the Irish Punt was in the Sterling Area until 1979 and tied to the UK pound.
All the ups and downs of the UK economy and the pound in that time affected the Irish. As problems at the centre all too often worsen as you get to the periphery it is arguable that when the UK economy had issues then the Irish had bigger ones.
Also, it meant that as the Great Agricultural Depression that began in the Atlantic Isles in the 1870’s came to an end post World War 2, there was not the capital or finance in Ireland to enable real recovery and it wasn’t coming from London. Into the 1950’s and 1960’s there was still desperate rural poverty and limited economic opportunities.
In 1979 the punt detached from the pound under the European Exchange Rate Mechanism which Ireland joined when the UK did not. The ability to manage the currency together with the grants and subsidies gained from the EU began a period of growth that injected prosperity and confidence into the Republic.
When at the end of the 1990’s the punt converted to the Euro this growth became rapid and uncontrolled money expansion. One part of this was the reluctance of Irish coalitions to put the brakes on early. This was compounded by the inability of the Irish government to determine its rates of interest. These were fixed by the ECB.
Another was the creation of a quasi tax haven status which brought all sorts of funny money taking advantage of the tax breaks and the dislocation of interest rate levels. This added to the overall debt and encouraged high levels of personal debt. Now Ireland is financially a broken state with a bleak and difficult future.
My Grand Aunt Lily, baptised Elizabeth but did not like being called Lizzie, married an Irish hotelier and went to Newbridge in Kildare close to The Curragh and not far from what is now the Irish National Stud. She kept in touch with her family especially the nephews and nieces. From time to time she would pass on tips that often were welcome and it is said saw some of my family through their education.
They proved to be far more reliable than any of the financial predictions ever made by all those experts in recent times. As I said above, Her Majesty knows her horses.
She might be a better bet than either the ECB or the IMF.