x Abu Dhabi, UAETuesday 23 January 2018

Former Irish prime minister learns timing is everything

You have to feel just a little sorry for John Bruton, the former prime minister of Ireland, who was in Dubai trying to sell Irish financial services to the Gulf.

You had to feel just a little sorry for John Bruton, the former prime minister of Ireland, in Dubai on Monday.

Here is a politician who has done just about everything in a long and distinguished career: the head of government of an EU country; early involvement in the testy Northern Irish peace process; the first European government head to address the US Congress since 1945; an architect of the EU stability and growth pact, which paved the way for the euro; and an EU ambassador to the US.

Yet here he was in Dubai - part of a multi-centre trip to the region - with an almost thankless job: trying to sell Irish financial services to the Gulf.

The trip must have been organised months ago, so whoever planned it couldn't have known that on the very day Mr Bruton was talking about the attractions of Ireland as a financial services hub, his country would be in the latest spasm of its ongoing crisis, or that the EU would be locked in an increasingly desperate bid to avoid the collapse of the currency Mr Bruton did much to establish.

The timing was awful. Instead of waxing lyrical about the attractions of the International Financial Services Centre in Dublin, the organisation of which he is now chairman, Mr Bruton found himself fielding questions about the unfolding crises in Ireland and the EU.

Irish officials in the UAE have had plenty of time to prepare the arguments for continued investment in the country, despite the crisis.

Its "enterprise economy" , as opposed to its financial sector, is still strong, with foreign companies still heading for Ireland attracted by its low corporate tax rate. Irish exports, the highest in the EU as a proportion of GDP, continue to rise. "We have problems with the banking sector, but 80 per cent of the economy is in rude good health," said Mr Bruton.

Maybe, but the 20 per cent now threatens the rest of the euro zone, and the whole European system, with implosion.

The Dubai audience, which included Ahmed Humaid al Tayer, the governor of the Dubai International Financial Centre and member of the Supreme Fiscal Committee overseeing the emirate's recovery, was familiar with Mr Bruton's explanation of his country's ills.

Over-reliance on property and construction, the financial problems caused when this property bubble burst, and the need of help from a wealthy neighbour, are all themes common to both Dubai and Dublin.

Gulf investors listened appreciatively as Mr Bruton put Ireland's case: the country is changing its laws to make Sharia-compliant products more financially efficient, and a range of new products are being offered to Ireland's Muslim population, the fastest-growing ethnic group in the country. Some 20 per cent of the Islamic funds outside the Middle East are already based in Dublin and the Irish hope that will increase.

But there is a paradox at the heart of Mr Bruton's appeal that is difficult to reconcile: on the one hand, the country is "open for business as usual", as he proclaimed; on the other, the representative from the Irish central bank promised an "obtrusive and challenging" approach to the financial industry.

Which is Ireland going to be, post-crisis? A business-friendly, lightly regulated market welcoming all from around the world? Or a suspicious, snooping regime of regulators and watchdogs guaranteed to deter potential investors?

That paradox is also reflected in the wider EU at the moment, with the prevailing force being the anti-business tendency, at least insofar as it concerns the Anglo-Saxon business model that the Celtic tiger has come to represent in French and German minds.

Given his background, you would expect Mr Bruton to be a Europhile, even if bruised by the current relationship between his country and the EU. He would not want to see the kind of outcome now being openly contemplated by policymakers in Berlin, Frankfurt and Brussels: the end of the euro as the continent's single currency; and the severe weakening, even to the point of collapse, of the EU itself.

This was an unthinkable prospect just a few months ago but the Greek and Irish crises, as well as the Portuguese and maybe Spanish crises that look set to follow, have made such an outcome a matter for serious contingency planning.

Put simply, Europe is running out of money with which to bail out the weaker members of the euro zone. The €750 billion (Dh3.68 trillion) rescue fund set up to handle the Greek crisis looked enormous at the time but the idea of these funds is that they are never used; their existence alone is supposed to solve the problem.

Once they start getting eaten into - €110bn for Greece, €85bn for Ireland and what would be an awful lot more for Portugal and Spain - the fund becomes just an ATM for the global financial markets, paying out on the one-way bet of collapsing sovereign debts.

Mr Bruton could not have envisaged all this when he signed the growth and stability pact in 1996. But back then neither could he have imagined asking Gulf states for help with Ireland's economic problems.