Europe’s ‘Bay of Pigs’: The Irish case for a London Euro?

2010

In offering the Irish government a bi-lateral loan of €50Billion the British Government’s likely motive is to win Dublin as a partner in the development of a London Euro for the disparagingly termed ‘PIIGS’, Nations; of course one could add a third ‘I’, for Iceland. The paper takes the form of an open letter to Irish Ministers urging support for London’s promising initiative. As the map suggests it’s no secret!

Open letter to the Irish Taoiseach (PM) Brian Cowen and Finance Minister Brian Lenihan. Fianna Fail faces the most critical decision in the Nation’s history, whether to surrender sovereignty to an ECB/IMF bailout or enter into bi-lateral arrangements with London designed to help Ireland adopt a holding position pending the introduction of a London Euro for the Atlantic-Med Fringe .
Author: Paul Cassidy M.Sc. RRRP paul@pdfwebpublishing.com

11/18/2010

Europe’s ‘Bay of Pigs’: The Irish case for a London Euro DEAR M INISTERS COWEN AND LENIHAN

2010

Perhaps, Ministers, you are so heavily involved in the financial specifics of the current crisis that you may not be able to see this particular wood for the trees, so I’d like to take this opportunity Page | 2 to describe an exciting prospect gathering currency, namely a London Euro for the Atlantic-Med fringe, complimenting the Frankfurt Euro for Europe’s continental mass. To secure a role in this incipient London Euro project its vital Ireland develop its relationship with London by opting for a bi-lateral loan from Britain via the European Exchange Mechanism rather than conceding to the ECB/IMF led intervention which will lead to an immediate an irrevocable loss of economic sovereignty. Despite decades of structural fund and common agricultural policy transfers the core-periphery fault-line within Europe persists opening wider than ever during the current economic crisis. The Atlantic-Med Fringe referred to cynically as ‘Europe’s Bay of PIGS’, (including as it does Portugal, Iceland, Ireland, southern Italy, Greece and Spain) is already behaving as a separate currency zone in terms of the vital economic statistics of the nations and regions concerned none of which would now comply with the Maastricht Criteria, the basis for the single Eurozone project in the first instance. Turkish accession to the EU will extend Europe’s Atlantic-Med Fringe into the Islamic world bringing with it the prospect of the Middle East Oil Bourse trading in London Euros as opposed to Dollars anchoring what would otherwise be a comparatively weak currency. Dublin’s proximity to London and the British governments bi-lateral loan offer, via the European Exchange Rate Mechanism, is a clear invite to the Irish government to play a catalytic role in the emergence of the London Euro offering with it the prospect of Dublin’s International Financial Services Centre acting as a satellite to London’s financial services sector. Ireland’s best option is to accept this offer and play a holding game pending the launch of the London Euro even if that meant the temporary reintroduction of the Punt. The Irish government’s negotiating position in terms of reentering the Eurozone under the London Euro would be greatly enhanced offering with it the prospect of defending our corporate tax rate as an aspect of a bi-lateral subsidiarity agreement. Opting for further funding from the ECB and the IMF will effectively mean an end to our economic sovereignty and would copper-fasten partition whereas the London Euro offers the prospect of resolving the national question. A dual currency Eurozone would not represent a step backwards, towards nation state currencies, but rather a step forward to a Europe managed by twin cosmopolitan financial hubs allowing for a greater degree of subsidiarity within the constituent nations and regions and for a greater degree of flexibility in terms of Europe’s East-West relationships with Moscow and New York. More importantly it would create a financial and diplomatic bridgehead into the Middle East and the wider Arab world offering Islamic oil producing nations a veritable surrogate currency which they would wholeheartedly endorse.

Europe’s ‘Bay of Pigs’: The Irish case for a London Euro

2010

A L ONDON EURO TICKS A LOT OF BOXES IN PROBLEM SOLVING TERMS, AS THIS CURSORY CHECKLIST SUGGESTS: Page | 3 I. For Germany the London Euro would effectively prevent Europe’s peripheral economies from collapsing the continental Eurozone by creating a default currency option still subject to the EU Commission and Parliament; For the British the financial risks of acting as the cosmopolitan hub for the project would be entirely off-set by the prospect of the Middle East Oil Bourse shifting from Dollars to London Euros; For the US losing the oil bourse to a key NATO ally, likely to maintain currency rate symmetries between the New York and London currency markets, is far preferable to losing it to Frankfurt; and for the money markets it presents the prospect of getting all their ducks in a row: New York, London, Frankfurt, Moscow, Tokyo; For Islamic oil producing nations anchoring the London Euro with their oil bourse would give them significant diplomatic and economic leverage over London effectively offering them a surrogate currency of major international standing; For the Holy Land it would bring an end to the hegemony of US intervention and open the way to a diplomatic accord providing Israel with the kind of melting pot it requires to resolve its fate in partnership with Palestine and the surrounding nations; For Ireland it creates the prospect of renegotiating the terms of our entry into the Eurozone, of protecting our corporate tax rate and our neutrality as part of a bi-lateral subsidiarity agreement with London, and of opening the way for talks on unification of the Irish political system under a London based fiscal system; and For Iceland (and perhaps Norway also) it offers a way in from the cold into a closer relationship with the UK, Ireland and the Atlantic-Med fringe.

II.

III.

IV.

V.

VI.

VII.

Any idea that ticks that many boxes, just in rough sketch, is worthy of serious consideration. Add to that London’s offer of a €50Billion bi-lateral loan via the European Exchange Rate Mechanism and its clear Ireland is being invited to realign itself in currency terms. Ireland needs to avoid being further implicated into a continental Euro which has clearly failed to address the core periphery divide, despite best efforts. Losing financial sovereignty to London with whom we can negotiate on favourable terms is a far superior option to surrendering fiscal sovereignty to a centralising European system which will impose terms and conditions and manage remotely. Membership of the London Euro on the contrary is likely to see Dublin increase the status and function of its own International Financial Services Centre. SUBSIDIARITY: THE PATH TO A EUROPEAN REGIONAL RENAISSANCE & COMMON ACCORD A dual currency Europe far from diminishing the EU would make new accessions possible not to mention a major diplomatic and fiscal accord with the Islamic world. Europe would still have a single political centre, a single Commission and legislative framework. As a regionalist the most exciting aspect seems to me to be the veritable regional renaissance which a dual currency system would give rise to; invigorating the principal of subsidiarity and allowing Europe’s intricate medieval regional tapestry of regions to gain new expression around two major

Europe’s ‘Bay of Pigs’: The Irish case for a London Euro

2010

cosmopolitan ‘City-state’, hubs. This is not a betrayal of the European vision but a logical enhancement and deepening of it. For Ireland it is a bold step to change tack and face down intervention from the ECB and IMF in favour of developing a bi-lateral relationship with the UK in anticipation of the emergence of a Page | 4 London Euro. Adopting a holding position for a five year period will be the most challenging aspect of the decision as it will bring with it some challenging decisions of its own. Ireland needs the focused problem solving ‘Rationalpolitik’, approach which only Fianna Fail can bring to the current crisis and this may mean the temporary reintroduction of the Punt. Absenting ourselves from the Euro temporarily would see a massive reduction in the unemployment numbers as migrant workers moved to Eurozone countries and younger Irish workers considered gaining work and language skills abroad, offering them the benefit of highly favourable exchange rates in terms of savings electronically transferred to domestic banks. Our labourforce is top-heavy for these recessionary times. Rather than allowing people fill themselves with bitterness and bile we need to focus them on opportunity by creating an incentive to work abroad; and what better way than to provide them with the opportunity to exploit very favourable exchange rates. For the balance of the laborforce it means increased job opportunities and social welfare security at home as we apply ourselves to getting the country back on its feet.

IN CONCLUSION Dublin’s International Financial Services Centre was the brainchild of your predecessor Charles Haughey, a flawed genius perhaps, but one who pulled the IFSC project out of the hat in similar dark times. It proved to be a beacon light at the time. Imagine quadrupling its size and redeveloping the entire docklands with it, not on the basis of surfing some transient economic wave, but on the basis of permanent functions derived from London in the management of a London Euro for the Atlantic-Med Fringe. For decades now the Irish and British governments have been partners in peace, now they need to become partners in prosperity as well; and in that context resolving the national and regional issues which have dogged relations between us for so long. In doing so we would also be pointing the way for Europe as a dual currency system helping to put the absurd low level bureaucratic cold war between Britain and Germany into the past, where it belongs. My advice Ministers is not to stare this particular British gift horse in the mouth and to send the ECB and IMF packing instead. The reality for Ireland is and always will be that we are an Island on Britain’s western flank. It’s time we grew up, recognised and took advantage of that fact. If history has thought our two peoples anything it has been to respect the differences between us. Having done that now is the time to work on the commonalities we share and to extend the partnership for peace we have forged southwards, via Turkish accession, to the Islamic world and into the Holy Land itself.

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