French conservatives say they have a lot to learn from Ireland’s experience

Minister believes Ireland is not beginning a new property boom

When Minister for Jobs, Enterprise and Innovation Richard Bruton told 90 French and Irish business leaders about Ireland’s boom, crash and recovery at the Irish Embassy in Paris this week, the story took on the aura of legend.

The seminar was titled Exiting the Crisis: What are the Lessons from Ireland? Mr Bruton was flanked by Michel Pébereau, the former president of BNP Paribas bank and a godfather of French finance, and the economist Jean-Marc Daniel.

All three are advocates of liberal economic orthodoxy, so there was no disagreement. And, lest anyone think that Ireland was preaching to the rest of Europe, Mr Bruton cautioned at the outset: “It’s always dangerous to draw parallels between different economies. There are many lessons to what we’ve done, but there are not direct parallels.”

The Minister’s French interlocutors were rapturous about Ireland’s 4.8 per cent economic growth. The French economy will grow 1.1 per cent this year, the Organisation for Economic Co-operation and Development (OECD) has predicted.

‘In transition’

Mr Bruton cautioned that “Ireland is an economy in transition. We are far from arrived at the stable point where we want to be. Unemployment is still 10 per cent. Emigration would still represent 30 per cent of our annual cohort. From an Irish point of view, we are on a journey.”

He went on to note that “we are politically very centrist, a conservative people. We would have a much lower level of social protection than would prevail in the rest of Europe, but we have always invested in education.”

When the economic crisis struck in 2008, construction fell by 66 per cent. Public spending surpassed revenue by 50 per cent, the Minister recounted. “So the debate about whether austerity was a policy choice is beside the point . . . For a country like ours, there wasn’t a choice.”

Mr Bruton was asked how the Government got people to accept such a significant drop in their standard of living.

“People have accepted it with the rational side of their brain, but perhaps not with the emotional side of their brain,” he said. As a result, “you are seeing political vulnerability in the sense that polls suggest one half of voters would vote for none of the established parties, but for Independents or Sinn Féin.”

He does not believe that dissatisfaction will spell defeat in the next election. “The thesis the Government will be offering is: Yes. There has been a lot of sacrifice to get where we are, but now we have an economy that is robustly competitive, that is growing . . . It has built itself on bedrock, not quicksand. I think the Irish people will vote for stability.”

What was initially an export-led recovery has “spread into the domestic economy”, he told his Parisian audience. “There’s a small recovery in construction, in retail. Tourism has been a really strong element, and the food sector is going through a revolution with the removal of quantitative barriers on milk production.”

Asked whether Ireland has started another property boom, Mr Bruton said that a shortage of supply due to the collapse of the construction industry has combined with the banks’ reluctance to lend.

“It’s not a runaway property boom with huge spending, big bankrolling. It’s a different problem, but one we need to solve.”

Mr Pébereau has just prefaced a report on Ireland: the return of the Celtic Tiger. He said repeatedly that European societies must embark on a process of constant reform if they are to maintain high standards of living in the face of technological change and globalised competition.

“We must convince Europeans that the market economy is to economics what democracy is to politics,” he said.

Mr Pébereau portrayed Ireland as an example of permanent adaptation and reform. The Irish population were “historically and culturally better equipped to accept policies of rigour”, and Irish politics were not plagued by the extreme partisanship of other EU countries.

Asked what French cabinet ministers should learn from Ireland, Mr Pébereau stressed the importance of reducing public spending, particularly on social programmes, and reforming the unemployment insurance regime.

Mr Pébereau also praised Ireland’s reform of its pension system. Finally, Ireland divided the number of local government structures by four, drastically reducing the number of local elected officials. These were profound, structural measures, not temporary reforms, he noted.

Mr Daniel, the economist, added what he called the “du Barry factor” (after a royal mistress) which left French leaders in denial about the urgency of reform, and the deep divide between the French public and private sectors.

Tax harmonisation

Mr Bruton said tax harmonisation was not a realistic objective in Europe “because every country has a different historic perspective on taxation and public expectation of services”. Ireland has “very consciously structured our tax system around our national priority to build an employment economy”, he said.

“We have very low social obligations on employers compared to France. We have low corporate tax. On the contrary we have high indirect taxes such as VAT. We have introduced property tax. Countries make their own choices about tax and spending. It’s not realistic to expect us to converge, because we have different requirements . . . It’s true that larger economies need to learn the tool box of smaller economies.”

This week 900 scientists wrote to Mr Bruton criticising the Government’s neglect of basic research in favour of research that is commercially profitable. He defended the Government policy which dictates that research be both “world class” and “relevant to our capacity to grow competitive advantage,” saying it was “a very sensible policy for a small, open economy”.

He recognised the danger that upcoming British elections will lead to a referendum on EU membership and a possible “Brexit”. The EU “could accommodate some of the reforms that [Britain] is calling for”, he said. If the UK left Europe, “it would create a border within Ireland, between North and South” and possibly harm close trade relations between Britain and Ireland. “Britain would stand to lose very considerably if it made a decision to exit.”