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Ireland's political and cultural magazine
— June - July 2010
of establishing the
Eurozone was to reconcile France to German
reunification following the USSR’s collapse.
This political agenda used economic
means that most economists who were not
EU-ideologues regarded as quite unsuitable
for that purpose. The irrationality of this ill-
conceived and doomed project is now playing
out before our eyes.
The value of having one’s own currency,
and with it the ability to follow an independ-
ent exchange rate policy, was shown decisively
in Ireland from to .
This was the only period in the history of
the Irish State when we followed an independ-
ent exchange rate policy and, in effect, floated
the Irish pound, giving us a highly competi-
tive exchange rate. This boosted Irish exports,
inhibited competing imports and gave us the
“Celtic Tiger” years of high economic growth.
From the s to , the Irish pound
was pegged at par with sterling, reflecting the
conservative economic outlook of those then
running the State. This gave Ireland an implic-
itly over-valued currency, which inhibited eco-
nomic growth and employment in those years.
In , we broke the link with sterling, but
tied ourselves instead to the Deutschmark in
the European Monetary System (EMS) in prep-
aration for the Economic and Monetary Union
(EMU). Britain did the same, but the markets
forced Britain to devalue in September .
When this happened, Ireland stuck with the
Deutschmark, so that by January the Irish
pound was worth pence sterling. All hell
then broke loose, for our over-strong currency
was ruining the State’s foreign trade, which was
mostly with the UK and USA.
This forced a devaluation of one-tenth from
to pence sterling in February .
We had a similar devaluation vis-à-vis the dol-
lar and, in effect, floated the Irish pound. This
floated downward for the rest of the s.
It was a nominal pence sterling when we
adopted the Euro.
At the time the Republic did roughly one-
third of its trade with the other Eurozone coun-
tries, one-third with the UK and one-third with
the USA and the rest of the world.
The devaluation gave us a highly com-
petitive exchange rate. This in turn encour-
aged foreign and domestic investment. Our
annual economic growth rate, which had aver-
aged -% a year from the s to the early
s, doubled to % in -. It aver-
aged % a year between then and . In
the first years of Euro membership the value
of the Euro fell vis-à-vis the dollar and ster-
ling, fortuitously adding to Ireland’s economic
competitiveness.
With supreme folly Ireland’s ultra-Europhile
politicians decided to join the Eurozone in
on the assumption that the British would
join it in a year or two, but they did not and
will not.
“The Eurozone will give us permanently
lower interest rates”, said the ESRI’s John
FitzGerald at the time. Eurozone interest
rates were low at the time to suit Germany and
France, which were then in recession. Ireland
was in boom and needed higher interest rates
to prevent price bubbles. Instead we halved our
interest rates on joining the EMU, giving huge
impetus to the borrowing binge that followed
in -.
Now we are caught inside the Eurozone
with an over-valued Euro exchange rate as the
sterling and dollar areas with which we do the
greater part of our trade float their currencies
downward and we cannot do likewise.
The prime culprits in this are the Euro-
federalists in Iveagh House and Merrion
Square who advise Foreign Minister Mícheál
Martin, Finance Minister Brian Lenihan and
their predecessors, backed by their ideological
cheerleaders in the editorial office of the Irish
Times. They include the Grand Panjandrums of
Irish Euro-fanaticism: Garret FitzGerald, Peter
Sutherland, Alan Dukes, Pat Cox, Brigid Laffan,
Brendan Halligan, Ruairi Quinn and David Begg,
and their acolytes in the leadership of our polit-
ical parties and in the media.
The lesson of the Euro crisis is that the strug-
gle for national independence and national
democracy should have priority over every-
thing else until these have been attained - and
that to attain them Irish democrats, whether
on the Left, Right or Centre of politics, need to
unite, or at least campaign in parallel.
In the present context, this means raising
the demand for the State to leave the Eurozone
so as to restore an independent Irish currency.
We should join the other EU States that are in
the EU but are not trapped in the Eurozone and
restore our economic sovereignty.
“There is no example in history of a last-
ing monetary union that was not linked to
one State” , said Otmar Issing, chief econo-
mist of the Bundesbank and later director of
the ECB. And of course, there are many exam-
ples of States that were both monetary and fis-
cal unions but which have disappeared into
history because the solidarity that bound
their component nationalities and regions
together, sometimes for long periods, broke
down. Where now are the USSR rouble, the
Czechoslovak crown, the Yugoslav dinar or
the Austro-Hungarian thaler?
Unless we leave the Euro, all the media rhet-
oric about delinquent bankers and developers,
or business interests bemoaning the credit
crunch, or trade unions calling for priority to
be given to jobs and investment, are so much
blowing against the wind.
Anthony Coughlan is Director of the National Platform EU
Research and Information Centre, Dublin.
Eur-over
Ireland should abandon the Euro which was
established for political not economic reasons
and so has not worked
Anthony Coughlan
