To say that Ireland is in deep financial, political and societal trouble would be an understatement. Two years of depression and austerity measures look set to become even more excruciating after the budget announcement on the 7th December. The €85 billion bailout agreed by the European Union and the International Monetary Fund on the 28th November failed to inject confidence into Eurozone markets as the cost of borrowing continues to rise. Once described as an economic poster-child of the EU, this is a riches to rags story like no other.
Without needing to understand the economic technicalities of the crisis, both in terms of Ireland and the euro, the mess that Ireland is in is abundantly clear. Angry protests, increasing homelessness, thousands of empty apartments and a mass emigration of Ireland’s youth are all synonymous with the financial collapse. However, from a British perspective, many people question George Osborne’s decision to help fund the bailout when we are facing our own cuts here. A sombre editorial in the Irish Times a few weeks ago declared, “is this what the men of 1916 died for: a bailout from the German chancellor with a few shillings of sympathy from the British chancellor on the side? There is the shame of it all.” For all the Irish complaints, it seems that the British are hardly enthused by it either.
Britain’s total contribution will be approximately £7 billion, which includes the direct loan of €3.8 billion. This is the largest direct loan from any other country in the EU. According to BBC Business Editor Robert Peston’s analysis, “the UK is doing more than the basic minimum to help Ireland out of its predicament”. Not only are people asking where this extra money is going to come from, they are wondering if Britain, given the cuts at home, can really afford it. Some may even be led to consider whether cuts here are out of regretful necessity or, more sinisterly, whether there are ideological connotations attached to them.
Should Britain be paying this money, or as The Sun eloquently puts it, “bung Direland a €7.5 billion bailout”? The simple answer is ‘Yes’. On this occasion, Osborne has made the wisest decision. For all of his sentimental neighbourly rhetoric, it has nothing to do with goodwill. The purely practical reasons behind this decision are motivated by British self-interest.
British banks have the biggest single share in Ireland’s banks with an investment of over €130 billion, followed closely by Germany. The Conservatives argue that it is necessary for Britain to contribute to prevent the complete failure of Ireland’s banking sector. By agreeing to a bailout fund, Osborne is aiming to protect UK banks from full exposure to the crisis in Ireland. Moreover, Britain exports more to Ireland than to China and India combined, so it is essential that these trading links are retained, especially considering the shared border and history between the two countries.
Ireland isn’t out of the woods yet, and with Fine Gael, the main opposition party, against the Government’s plans, the future is very unpredictable. Unlike other unstable countries such as Greece, Portugal and Spain, Britain’s economic interests in Ireland run a lot deeper. This is a financial crisis that cannot be ignored.