The credit crunch of 2008 had a detrimental effect on a number of EU economies. The bursting of the so-called ‘American Housing Bubble’ triggered a domino effect of economic events that hit hardest in the economies of Southern Europe. The repercussions were not limited to the likes of Greece, Spain and Portugal. Across the continent, Iceland and Ireland, with their economies heavily reliant on financial services and housing, felt the pinch too.
“The Poor Man Of Europe”
Since its formation in the fifties, European eco-political spheres have branded Ireland as the poor man of Europe. This was due to the country being constantly affected with a shortage of skills within its working population and high levels of unemployment. Throughout the eighties and nineties however, a significant amount of investment was attracted into the country from the EU as it re-branded itself as the ‘Celtic Tiger‘. When the credit crunch came to Ireland’s shores, years of economic redevelopment hung in the balance, as historic problems of unemployment started to take hold again, and the Irish parliament scrambled to make savings by cutting social support programmes such as unemployment and child benefits.
Following years of austerity, the Irish economy has shown signs of recovery and looked set to start growing. Unfortunately, events out of Ireland’s control have once again put the country in jeopardy. On June 23rd the British public shocked the polls and voted marginally in favour of leaving the European Union.
Britain Votes Leave
Prior to the referendum, polls had a vote to ‘Remain’ marginally slightly ahead ‘Leave’. Following the vote, the world woke up the next morning to find that 51.9% of the British public decided that the UK shouldn’t be in the EU, putting an end to over four decades of economic and political co-operation. Following the referendum result, the UK has seen political upheaval not seen since the end of WWII, and as a result questions are now being asked of Ireland’s continued economic status.
Ireland has a number of reasons to be concerned about the UK’s decision to leave the European Union. One such reason is that Ireland happens to have a physical land border with the UK, where the Republic of Ireland meets Northern Ireland. A major motivation for British “leave” voters was the ability of EU citizens to move freely across continental Europe. The UK’s withdrawal from the European Union most likely will result in the formation of a controlled border where the UK and Ireland meet. This will come with both economic and social implications with regard to the history and connotations of check-points that once existed on this border when tensions between the Ireland and the UK were high.
When we look at the way the Irish economy is balanced, there are a number of things you can’t disregard. Ireland is a country whose economy has had a tough time across the last ten years. An economy that heavily relies on trade with world’s seventh biggest economy across the Irish Sea. Now, the economy’s stability and future are being questioned. In the immediate future, we hopefully won’t witness Ireland falling off a cliff, as Theresa May, the newly appointed UK Prime Minister has suggested that Article 50, a section of the Lisbon treaty written in to detail the process of a member’s exit from the Union, won’t be put into affect until 2017 at the very soonest.
A look at economic co-operation shows us that businesses of any size should be watching very carefully. On the micro size, the British Hotelier Macdonald Hotels, recently acquired a location in Kinsale, near Cork from the Carlton group, and re-branded the location as the Macdonald Kinsale Hotel. This presents a classic example of a medium sized British-based business being able to expand into a new market thanks to the free market offered by the EU.
On the macro side of things we can look at the success of the low-cost Irish airline, Ryanair. Since the mid-nineties Ryanair has enjoyed sustained growth offering passengers low cost routes to European locations from a number of bases in the UK. As recently as the 31st of August however, the ever outspoken CEO of the airline Michael O’Leary has come out and said the result of the EU referendum means that Ryanair will now carry 5 million fewer passengers to and from the UK as a result of Brexit. O’Leary has a reputation for making outlandish statements as a means of getting press coverage, but that doesn’t mean his statements are completely unfounded.
At the moment we can only speculate as to the future of Ireland’s economy following the Brexit vote. This speculation will continue in the lead up to the triggering of Article 50, and we most likely won’t have a clear picture for several months after that takes place. It is, however, sensible to consider every possible outcome that could result from Britain’s decision to leave the EU, and how it will affect the EU as a whole.