David McWilliams: Ireland needs a new friend in Europe. But who?

Café Bazar in Salzburg may seem an unusual spot to consider Ireland's future economic choices, but it could be a perfect place to start. After the British leave the EU, Ireland will need a new friend or a series of new friends within the European Union. This will involve hard choices and possibly some unpleasant trade-offs. Let's call this challenge the Irish dilemma.

As long as the UK was in the EU, Ireland played a canny, if slightly duplicitous, game. We could appear in Brussels to be good Europeans, giggling derisively at the isolated British, safe in the knowledge that those same friendless British shared many of our interests and would therefore stand up for us.

In protecting their own interests they also protected our low-tax, American-focused economic model without our having to lift a finger. The Brits could do the heavy lifting while we played both sides. Within the EU gang we could remain friends with everyone, as long as Britain remained friends with nobody.

The aloof but powerful loner regularly protects weaker lads from the gang. We elevated this playground psychology to a cornerstone of our national diplomacy. But that era is over

This is a triangular dynamic that you see in most primary-school playgrounds. Children instinctively understand this game, its limits and its benefits. The aloof but powerful loner regularly protects weaker lads from the periodic maliciousness of the gang. We elevated this common facet of group psychology to become a cornerstone of national diplomacy. But that era is over.

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Today we face a conundrum: how can we remain a fully fledged member of the EU while preserving the Anglo-American economic model that underpins our prosperity? Being net contributors to the EU also changes the game.

For as long as Ireland was benefiting from EU largesse, the case was open and shut.But conditions are changing fast. In the past few days, politics in Germany, just kilometres north of Salzburg, has added a worrying dimension to the Irish dilemma.

The blueprint

The blueprint for Germany's "grand coalition" between Angela Merkel's centre-right Christian Democratic Union and Martin Schulz's centre-left Social Democrats constitutes the clearest drive towards European integration since Jacques Delors ran the European Commission. This is not good news for Ireland – and coming so soon after Brexit it constitutes a double whammy to Irish diplomacy.

For most of the Merkel years Germany has put sovereignty before integration. But events have changed this. Merkel is wounded mainly by the relative success of the Eurosceptic, far-right Alternative für Deutschland in September's inconclusive election. Her initial instinct was to respond to the nationalist AfD surge at home by stealing some of their clothes, rejecting French overtures for more EU integration.

This move mirrors a trend we've seen throughout Europe, whereby the main influence of populist parties is not within government but in pushing the competitor party, usually the centre-right incumbent, to adopt more populist tones.

But the cold realities of political survival have prompted Merkel to undertake yet another U-turn. Rather than genuflect to the AfD in Germany (as the Conservatives did in Britain with Ukip), she has decided (or been persuaded) to fight them head on over Europe with the full support of the centre left.

Germany now wants what France wants: more integration, more harmonisation, a new euro-zone budget and fiscal policy, and, most worryingly for Ireland, a single EU corporation-tax rate. Without Britain, and with Berlin and Paris zeroing in on Dublin, we are on our own. Unless of course we reach out to others.

We prefer to be loved rather than feared; any new Irish assertiveness will tend to favour deals with others rather than using our veto. But who might these new allies be?

Ireland needs to protect its low-corporation-tax model, but how? We Irish prefer to be loved rather than feared; any new Irish assertiveness will tend to favour deals with others rather than using our veto in isolation. But who might these new allies be? Who in Europe is prepared to slow down, or even reverse, the reinvigorated Franco-German integrationist juggernaut?

This search brings us here to Salzburg and a part of the world that was once called Mitteleuropa. In the old days Café Bazar was a haunt of the Habsburg bourgeoisie. Today it is similarly well heeled, cultivated and conservative. Salzburg, the home of Mozart, is traditionally the power base of the centre-right Austrian People's Party, a sort of Alpine Fine Gael.

But in the last election, in October, Austria's far-right Freedom Party won a huge 27 per cent of the vote. They've dragged Austrian politics to the right, and to the right in this region means anti-immigration, particularly anti-Islam, anti-marriage equality and Eurosceptic.

A similar politics is resurgent across the former Habsburg Empire and north to Poland. In fact Churchill’s original iron curtain, a line from Szczecin to Trieste, marks a rough border between the liberal, pro-integration old EU and the populist, pro-national-sovereignty new EU.

Ireland's choice

The question for Ireland is whether we could hold our noses and throw in our lot with the populist ideology of these countries. Realpolitik is never comfortable. It is about national interest and nothing else.

To put a spanner in the Franco-German works, could Ireland seek closer ties with central European countries such as Poland, the Czech and Slovak republics, Hungary and Austria, despite their atavistic core cultural policies?

If the EU’s next phase of integration involves an integrationist core, with fully harmonised corporate-tax rates and shared liberal values, and an outer, looser grouping with differing tax policies and a cultural agenda that is anathema to us, which way should Ireland jump?

Economically, the looser outer group makes more sense, but it means lying down with unsavoury bedfellows.

With the UK going, the easy options go too. Ireland will have to make a choice. As the political maxim goes, “To govern is to choose.” Let’s see what that means.