It’s of­fi­cial – we are ac­tu­ally the new north­ern Euro­peans

Irish Independent - Business Week - - APPOINTMENTS -

IT has been talked about in Ire­land for many decades – if not cen­turies. Our lit­tle is­land may be sit­ting out on the edge of north­ern Europe but are we re­ally more a south­ern Euro­pean coun­try?

In terms of cul­ture, at­ti­tude, religion, out­look, lifestyle, the econ­omy – and, of course, fis­cal dis­ci­pline – we have tended to have more in com­mon with our Mediter­ranean cousins in places like Por­tu­gal, Spain, Italy and Greece.

What­ever about those shared char­ac­ter­is­tics in the past, when it comes to form­ing new al­liances at the EU ta­ble in the 21st cen­tury, we are now def­i­nitely a north­ern Euro­pean na­tion.

This be­came ‘of­fi­cial’ ear­lier this year when we joined up with the group­ing of seven other EU coun­tries now re­ferred to, with some irony, as the Hanseatic League 2.0.

It con­sists of our­selves, the Nether­lands, Den­mark, Swe­den, Fin­land and the Baltic states of Es­to­nia, Latvia and Lithua­nia.

The name is a re­minder of the Re­nais­sance-era con­fed­er­a­tion of north­ern Euro­pean cities that dom­i­nated trade in the Baltic and North Sea. The orig­i­nal Hanseatic League rep­re­sented an enor­mous trad­ing and po­lit­i­cal al­liance across nearly 200 cities in coun­tries from Rus­sia and Fin­land, to Germany, Bel­gium and the Nether­lands from the 13th to the 16th Cen­tury.

The orig­i­nal league did not in­clude Den­mark and in fact the Danes went to war with the league over ship­ping routes in its wa­ters. But that is all, shall we say, firmly in the past now.

Ire­land was never in the mix back then. At that stage we were still more fo­cused on get­ting one over on the boys down the road.

But the orig­i­nal league did in­clude a city in Ice­land, one in Nor­way and three in Bri­tain.

The new club is be­ing de­scribed in Brus­sels as a group­ing of fis­cally con­ser­va­tive coun­tries. We are the new fis­cal hawks.

It all be­gan over din­ner in a Brus­sels steak­house in 2017 af­ter an EU fi­nance min­is­ters meet­ing. The group of eight is led by Dutch fi­nance min­is­ter Wopke Hoek­stra, and the coun­tries are co-op­er­at­ing and club­bing to­gether to find com­mon cause on the fu­ture di­rec­tion of the EU once the UK leaves. Bri­tain has tra­di­tion­ally been a lead voice in free trade mat­ters and its de­par­ture from the EU raises many ques­tions about the fu­ture di­rec­tion of Euro­pean in­te­gra­tion.

The group holds pri­vate din­ners ev­ery month and has is­sued com­mon po­si­tion pa­pers this year on three top­ics. These in­clude a paper on re­sist­ing at­tempts at creat­ing more com­mon eu­ro­zone spend­ing tools, de­mand­ing more pow­ers for the euro’s bailout fund.

When Paschal Dono­hoe faced op­po­si­tion from France and sev­eral other big EU coun­tries on the in­tro­duc­tion of a new dig­i­tal tax on tech com­pa­nies, he was sup­ported by sev­eral of the Hanseatic group na­tions at a meet­ing of fi­nance min­is­ters.

The ini­tia­tive, spear­headed by French fi­nance min­is­ter Bruno Le Maire, was knocked back fol­low­ing this show of strength and the agree­ment of Germany. To some ex­tent Ber­lin, has been en­cour­ag­ing the Hanseatic al­liance while re­main­ing part of the Franco-Germany axis, which some French politi­cians would ar­gue is at the core of the Euro­pean project.

Ger­man fi­nance min­is­ter Olaf Scholz told the ‘Fi­nan­cial Times’ re­cently, “I am from Ham­burg – we are the tra­di­tional an­cient Hanseatic League.”

Ear­lier this month, Mr Dono­hoe met fi­nance min­is­ters from the Baltic States and the Nordic coun­tries in Brus­sels. The Dutch and Ger­man min­is­ters also called in for a cof­fee, ac­cord­ing to the ‘FT’. Be­fore that, Leo Varad­kar met his Nordic and Baltic coun­ter­parts in the mar­gins of an EU sum­mit in Brus­sels in Oc­to­ber.

Bri­tish Prime Min­is­ter

Theresa May asked to at­tend but ap­par­ently was po­litely re­buffed.

News­pa­per re­ports sug­gest that se­nior diplo­mats of these coun­tries have been meet­ing reg­u­larly since the start of the year. Ten­sions about the group came to a head last week when Mr Le Maire be­rated Mr Hoek­stra in front of two jour­nal­ists while they were hav­ing post-din­ner cof­fee at the French fi­nance min­istry.

Ac­cord­ing to the ‘FT’, Mr Le Maire went on a tirade against the so-called “closed clubs”, ac­cus­ing the al­liance of threat­en­ing deeper eu­ro­zone in­te­gra­tion and ul­ti­mately weak­en­ing the EU’s abil­ity to ri­val global pow­ers like China and the US. Mr Le Maire’s re­marks high­lighted the grow­ing in­flu­ence the Dutch-led al­liance may be hav­ing in Europe.

For some though, it is still seen as a col­lec­tion of rel­a­tive min­nows. It was once knocked as ‘Wopka and the Seven Dwarfs’. Na­dia Calvino, Spain’s fi­nance min­is­ter, an­noyed some of the club’s diplo­mats when she re­fused to re­spond to a re­cent po­si­tion paper they had put for­ward on the grounds it was the work of “small coun­tries with small weight”.

So what are we get­ting into ex­actly, and why? Af­ter the fi­nan­cial cri­sis, its threat to the sin­gle cur­rency and the sub­se­quent bailouts for Ire­land, Por­tu­gal and Greece, the EU has been di­vided on whether the so­lu­tion should be more Euro­pean in­te­gra­tion or less.

The French have been spear­head­ing a ma­jor push to­wards greater in­te­gra­tion and cen­tralised con­trol. To some ex­tent Ire­land has to be care­ful about that. Smaller coun­tries could eas­ily get squeezed out in a more ho­moge­nous, cen­tralised Europe. But we are not alone in think­ing that way. Clearly, these reser­va­tions are felt not only by other small mem­ber states but ones that have a rea­son­able level of col­lec­tive clout if they can form joint po­si­tions on things.

The ques­tion is how like-minded are these coun­tries and where does Ire­land fit in? Not all eight

Map­ping out an EU fu­ture:

the ‘Hanseatic League 2.0’ com­prises Ire­land, the Nether­lands, Den­mark, Swe­den, Fin­land and the Baltic states of Es­to­nia, Latvia and Lithua­nia mem­bers agree on ev­ery­thing but they share a com­mon out­look on many eco­nomic ques­tions.

They favour com­pe­ti­tion in the sin­gle mar­ket and they want to re­tain strong na­tional bud­getary re­spon­si­bil­ity within the eu­ro­zone.

It is some­what ironic that

Ire­land should find it­self in the com­pany of the great­est fis­cal dis­ci­plinar­i­ans so quickly af­ter need­ing a mas­sive multi­bil­lioneuro bailout.

Dur­ing the bailout years, the Finns were very hawk­ish on burn­ing bond hold­ers. So, too, were the Ger­mans. Now we are closer to hav­ing a shared view on how fu­ture bailouts should op­er­ate and burn­ing bond­hold­ers is a big part of it.

It has come too late for us.

But sit­ting at the Hanseatic ta­ble may be no bad thing.

The Ir­ish Gov­ern­ment wants to re­tain in­di­vid­ual tax­a­tion pow­ers es­pe­cially when it comes to cor­po­ra­tion taxes. Yet, it also wants to be, what Leo Varad­kar de­scribed last week as, “on the right side of his­tory on the cor­po­rate tax de­bate.”

It re­mains to be seen how

Ire­land will achieve that given that our very fi­nan­cially suc­cess­ful cor­po­rate tax struc­tures have al­ready fa­cil­i­tated many multi­na­tion­als in pay­ing so lit­tle tax.

There is an­other ar­gu­ment that says Ire­land needs to work harder at pan-Euro­pean re­la­tion­ships once the UK leaves the EU.

There is a nat­u­ral space left at the ta­ble when the UK goes which could eas­ily be filled by, or carved up by, France and Germany in par­tic­u­lar. Of course some might ar­gue that a club of these fis­cally con­ser­va­tive coun­tries might in some way mark a shift to the Right in Ir­ish eco­nomic pol­icy. But the group con­tains some of the most suc­cess­ful so­cial demo­cratic states in Europe like Swe­den and Den­mark, with mod­els of high tax­a­tion and high pub­lic spend­ing.

Per­haps the most sur­pris­ing thing is see­ing Ire­land re­ferred to in the Euro­pean press as a mem­ber of a “fis­cally con­ser­va­tive” group of north­ern Euro­pean coun­tries.

All is changed, changed ut­terly – at least for now any­way.

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