The fact that ICMSA President Jackie Cahill was highlighted in the Tipperary Star last week as among the first national figureheads to speak out on an ‘exit strategy from the Euro’, is ample evidence of how close the leader of 25,000 farmers has kept ‘his ear to the ground’. Living in the unpredictable cuckoo land of current world economics, its time, not just for farm bosses, but for the heads of all export orientated industries to look at this issue seriously, study their options and at least be prepared for any eventuality.
As an ‘Irish Observer’ blog read recently -- ‘Ireland would be best placed to emerge from a recession if it had it’s own currency’. It may even become imperative to leave the eurozone rather than operate under a single treasury -- if there is a pressurised German-led fiscal integration. This would stifle our exports, our ability to expand, pay our debts and at the same time cause us lose control over our national budget and taxation systems. We are well aware of our Foreign Direct Investment companies and the 100,000 highly skilled personnel they employ, earning very good salaries. We are also conscious of the incentives that keep these outfits here.
Maybe it is consequent to Mr. Cahill’s Speech at his organisation’s AGM in Limerick -- but rumour has it in Dublin --- the Irish Central Bank is back printing punts -- just in case of break-up. It was also footnoted in Evening Herald 25/11/11 -- Banks in Britain, though not having as large exposure to the eurozone, are drawing up contingency plans for the potential break-up of the eurozone or countries leaving the single currency.
By exiting the Euro system, admittedly we would gain more than most -- given the very open nature of the Irish economy with food, pharmaceuticals and technology accounting for the greater part of our GDP. We would profit by devaluing our currency and, of course, the Government might decide to lighten its debt burden by clipping the bondholders and start again.
However, at the end of the day this country would have to run itself and would need to find money from somewhere. Having blotted our copybook by leaving eurozone, banks wouldn’t be throwing money at us. What if we had a ‘run on the banks’ or had a problem getting back in the stock markets? Interest rates would have to rise sharply to get money back to the country and it’s banks. Mortgage repayments and household debt, converted to punts and with devalued currency, would end up costing more than in Euro terms.
Time Factor for Changeover. How long this would take compared with the predicted length of time for the Euro to fully recover -- would possibly be the major decider when balancing positives and negatives on taking such action. We cannot finish with Euro on Friday evening and start with Punts on Monday morning! Considering we are in Euro for 12 years -- how many years were we preparing for admission? Taoiseach Enda Kenny emphatically disagreed with Mr.Cahill, while assuring him that European leadership has all the flexibility and tools available to deal with structural problems in the eurozone and with the Euro.
Surely worth discussion but what a decision to be saddled with!