It has been a week of deals and mergers. Superlatives have been applied to completely different events dominating the headlines over Easter the Northern Ireland talks agreement and the three-in-row mergers of mega-banks in the United States.
It has often seemed that cross-Border economic co-operation has been the Honda 50 of Anglo-Irish and Northern Ireland affairs, mundane and boring, chugging along slowly while the constitutional and political matters have been the Goldwings and the Harleys of the highways.
This, despite the fact that there have been numerous and rigorous economic analyses of the potential for cross-Border economic co-operation, the latest in the Cambridge Journal of Economics, highlighted in the Irish News of April 9th, the day before the morning after. Indeed, there are many existing and growing cross-Border business links. Business and economics have always had a sort of humble servant role in relation to the great constitutional issues on this island. Not so in the EU. Economic matters were well and truly put before constitutional issues in the early days of the European Economic Community, the European Coal and Steel Community and the European Atomic Energy Community.
One of the many fascinating questions for analysts is which is the horse and which the cart as between constitutional/political and economic arrangements. The EU's success so far seems to point towards the economic being a prime force. Even the disappointments of the Amsterdam Treaty tend to confirm this, insofar as it did not concentrate on economic questions. If EU developments eventually make the Border imperceptible, then vindication of the economic approach will be complete in one of the most constitutionally sensitive regions of the EU.
Neo-functional spill-over theory is, I believe, the evocative term political scientists have for a process which explains how political units are formed by increasing the powers of small institutions initially confined to limited areas. The EU is a classic case of how small institutions with limited powers can grow their powers by "spilling over" into more and more areas. In that context, it was interesting to see Geraldine Kennedy's report in this newspaper that Mr Trimble succeeded in having all economic policy areas removed from the remit of the North-South implementation bodies in the last days of the negotiations. Perhaps he is convinced of the claims of neo-functional spill-over theory. This would be consistent with British, Conservative Euro-scepticism.
The agreement suggests that the North-South implementation bodies will have a role in relation to agriculture, tourism, transport, EU Interreg and Leader programmes, inland fisheries and marine matters. Not the full panoply of economic matters, but certainly not completely non-economic either. Who knows what might spill over?
The bottom line: far from economics and business being a humble, two-stroke, Honda 50, they may be the real engine of change, and implicitly recognised as such. Business, do not tip the forelock. Those US bank mergers needed no lessons in modesty. With two mergers totalling $205 billion on one day, it is impossible to get a handle on the scale of merged entities.
As in Northern Ireland, change throws up large questions. Will the management really be capable of managing the new institution with 5,000 branches and $570 billion in assets? We think of our own dear AIB and Bank of Ireland as colossi in Irish business. But they are very small in world banking terms. They shouldn't really exist at all as independents, according to the merger and consolidation logic in the US. Their participation in various forms in banks in the US looks even stranger in that merger logic.
The answer is, the logic is wrong, at least if you try to apply it everywhere. It won't work the same in all conditions. But broadly, mergers, consolidation and changing institutions seems to be a fact of life which will ultimately affect financial services on the island of Ireland as much as they have already affected retailing. If not before, then shortly after Britain joins the EMU. Economic change will have its way, with bankers and politicians being pulled along in its wake.
Oliver O'Connor is an investment funds specialist
