N.B. I wrote this piece before opening this morning (Saturday)’s Financial Times. Read the editorial. Suffice it to say that Great Minds genuinely do think alike!

It’s been quite a week. First there was the Budget, on which I’m writing separately, in and around which the Coalition managed to squander most of its remaining store of public goodwill. Then came the European Council in and around which ( a Stickley: if you find a good phrase, repeat it) the dust has only begun to settle.

Let’s take Europe first, since what happens to the Euro will determine our fate. Those who harbour any  residual anti British feelings should pause for a moment before rejoicing at Britain’s current isolation. If it becomes permanent, one collateral result, not so far appreciated, will be that Ireland will have lost her heavy-hitter champion against tax harmonisation. In that case – good luck to the Irish negotiators at the forthcoming IGC; they’ll need it!

It is, of course, far too early to predict how relations between Britain and the rest will develop. Remember the “Empty Chair” crisis within the Six in 1965 when De Gaulle’s France boycotted all EC business over attempts to extend the scope of qualified majority voting. The crisis was solved only with the Luxembourg Compromise under which a decision could be postponed where vital national interests were cited.(During the 80s Garret secured an increased milk quota for Ireland, with, admittedly, the goodwill of the rest, by citing a vital national interest.) Any bets on another Luxembourg-style compromise emerging? The gung-ho Tory anti-marketeers may be rejoicing now but there are many more thoughtful voices still to be heard from what remains Ireland’s most important economic and political partner.

However, what happened in Brussels should have two beneficial results here from the point of view of reality checks. Firstly at a political level the outcome  has demonstrated that , in principle, one country CAN be left behind by the others where they feel there is a compelling reason to do so. This should be kept in mind if we are called upon to vote on a new treaty. As I wrote last week, it will not be Nice; it will not be Lisbon. The stakes will be that much higher. We will not be able to sit smugly on our imagined veto. We could be left behind in our minority of one. This needs to be placed at the centre of any public debate on how we decide our position.

Secondly, the proceedings and the outcome should demonstrate that these meetings are NOT about Ireland and that our concerns, important as they appear to us, are peripheral  to the whole picture. The Germans and the French are not out to do a number on us; they are trying to grope towards a solution that will endure. It is very much in our interest to support them in this by engaging constructively in the process. We may or may not benefit from a new and enduring fiscal and financial architecture should one emerge. We shall certainly NOT benefit should efforts in this direction fail.

Only time will tell whether the Brussels outcome will be sufficient to save the Euro even in the short term. The details and the small print have yet to be analysed. Whether the agreement on closer fiscal cooperation to be cemented in several months will satisfy the markets on the separate but inextricably linked and more immediate issue of liquidity will become clear over the coming weeks. There may have to be yet another summit shortly if the markets give the thumbs down. But what are the options?  Is there any workable alternative to expanding greatly the role of the ECB, as more are suggesting?


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