Ireland's New & Different Era

In the week Irish government debt continued to rise towards pariah status on the money markets, the man charged with regulating Europe’s banks and financial institutions said he believed Ireland would rebound, but on a very different basis to the past.

The future must be based on the country’s real assets of educated people, research and development, developing the SME sector and agriculture.

This new era would be very different to the previous one not just for Ireland but for all EU member states, said Michel Barnier who succeeded Charlie McCreevy as Internal Market Commissioner.

But he has a very different philosophy to the former finance minister who helped create the Celtic Tiger and has been blamed because it proved unsustainable. Since taking office earlier this year he has completely turned around the previous Commission’s liking for light or no regulation as his office has produced a torrent of rules and regulations to supervise and control financial institutions and their products.

Asked if Mr McCreevy and others had moved to regulate the financial institutions, would it have changed things, he answers yes. “If we had the right tools for supervision some some of the situations, and not just for the Irish banks, would have been different”, he says.

Before leaving for Ireland on a high-profile visit in an exclusive interview with the Irish Examiner the former French Foreign Minister said the changes being introduced now were needed to ensure the financial markets are at the service of the real economy and the citizens.

“And not people serving the financial markets as it appears to have been for the last 15 years when stupid things were done and there was ridiculous behavior and toxic products and the more risk you took the more you got paid. That is what we try to put an end to”, he said.

Everyone must learn lessons from the past and a new era of good governance, intelligent supervision and a liberal economy but one that could be mastered must emerge.

In the past Ireland choose the path of having a very open economy. “It was not the only country to do that. Several others did. They had to play the game that markets would self regulate and the liberal economy would create a lot of growth”, he said.

The new era should see Ireland taking part in the discussion on having a common tax base for companies with branches in several member states, he said. He stresses this does not mean that Ireland would have to change its Corporation Tax rate with at 12.5% is the third lowest in the EU.

However, he said, companies want to be able to submit a single tax form to cover all their branches and not have to draw up different ones for each country. “No country can be forced but at the end of the day I believe it is in Ireland interest to participate”, he said.

A former French Agriculture minister, he believes that despite the difficulties Ireland is facing the country will rebound but must build on it’s assets of an intelligent people with strong character, develop it’s indigenous small and medium sized businesses and modernise its agriculture and food industry.

But like the rest of the EU member states, all must work together. “We must construct a united Europe, which does not mean that must all be the same, we must retain our diversity, but we need to be together - otherwise we will become a sub-contractor for China or some other big country”, he said. Part of the answer lies in further developing the single market for which Mr Barnier has just unveiled a series of proposals and has invited EU citizens to comment.

Mr Barnier just back from six days in the US says he has been looking closely at other parts of the world with high growth rates. “Today’s world is very different from 15 years ago, more fragile, unstable, with new emerging powers that do not ask permission and the traditional powers like the US and Russia. The question is do we want to be with them at the table and do we want to share our development model? “, he said.

Europe’s economies must be strengthened however and this means that Governments must learn lessons from the current crisis on managing their economies. “This needs a European dimensions of supervision”, he says referring to the decision by EU leaders last week to have their budgets reviewed in advance by Brussels and provide figures for specific areas that should act as an advance warning of pending danger.

“Examples of the new tools to identify housing bubbles for instance would have been useful for both Ireland and Spain. Countries lagging in competitiveness such as Greece and France would have been noted, and the risk of budget deficits would have been identified in time and so would have benefited very member state.

“We cannot continue taking out money in advance, saddling future generations with debt and sacrificing tomorrow”.

He acknowledges that financial regulation needs to apply globally to be successful and said he is working in parallel with other countries, notably the US in an effort to achieve this. For instance the regulation on derivatives - “$600,000 billion floating above our heads” - was delayed for two months so the EU could work with the US on the new rules.

Mr Barnier said he is following closely the three Irish banks and he names Anglo Irish, Allied Irish and Bank of Ireland. He says he would prefer not to comment on the measures being taken but says that he hopes the new colleges of supervisors to oversee financial institutions including banks and insurance companies in the EU with see an end to the culture of excessive risks that become crisis and creates a catastrophe. “And in future the tax payers will not have to pay but everyone will have to take their own responsibility”.