We should not treat lightly the European Commission's decision to recommend that Ireland be censured for disregarding the Union's agreed economic policy guidelines. Our relationship with many of our Continental EU partners does not suggest that we can rely on much sympathy from them on this.
For, as I pointed out over two years ago, there has been a highly significant and very negative shift in the tone of our relationship with our Continental EU partners during the past decade.
During the 1970s and 1980s we benefited greatly from the goodwill of many of these states - most strikingly France and Germany. Factors contributing to this initial goodwill included the contrast between our positive approach to the EU and Britain's striking negativism; the success of our EU presidencies; the objective rationality of the cases we put forward in support of key Irish interests, such as milk and fish quotas; the good use we were seen to make of the very substantial Structural Funds we received; and sympathy for a small and much poorer State that was seen to be making great efforts to catch up with its better-off neighbours.
The deepest cause of resentment against us has undoubtedly been the effect on the location of US investment in Europe of our very low level of corporate taxation, as well as the success of the IFSC in drawing into Ireland huge amounts of funds, from Germany in particular. Now, the fact that these measures, the first of which at least has played a crucial role in our economic success, annoy some of our partners is a necessary price to be paid for our success. But common prudence requires that to minimise any consequent unpopularity we should avoid unnecessary aggravation on other issues.
However, since 1990 Irish governments have failed to exercise this kind of prudence, but instead have gone overboard in pursuing less important objectives in an aggressive manner.
The consequent damage to our longterm vital interest in having a positive relationship with the European Commission and our EU neighbours, dates back to the over-strident, and subsequently triumphalist, stance our government adopted during and just after negotiations in 1990 on a new round of Structural Funds. This irritated competitors for these funds, such as Spain and also net donors like Germany, which up to then had been well disposed towards us.
Later in the decade I also found that some German and French officials resented the unwise over-emphasis placed here on US, as distinct from equally important EU, financial assistance to the Border regions and Northern Ireland - a bias that may have reflected the "Boston not Brussels" element in some Irish political thinking.
While there was some tolerance among our major partners for the negative attitude towards NATO of "neutrals" including Ireland, there could be no sympathy for the unique hostility shown by some Irish political leaders towards PfP - a hostility based on what seemed to be invincible ignorance married to disreputable political game-playing.
We also unwisely failed in the mid1990s to disabuse the Germans and French (whose economies were then in the doldrums) of the illusion that our new and spectacular economic growth was primarily generated by increasingly resented financial transfers from these countries to Ireland through the EU Budget. Those EU transfers certainly helped to remove some infrastructural obstacles to Irish growth, but were not the cause of that growth. It is also arguable that we could have better handled the defence of our low corporate tax system at the recent Nice European Council, where we were right at this stage to defend the retention of unanimous decision-making on tax levels.
This was right not merely because we need to maintain a low rate of taxation on our corporate profits for economic reasons but because, above and beyond this sectional Irish interest, it is desirable in principle that member-states retain the right to design their own personal taxation and welfare systems to suit the different social needs and ideals of their peoples.
(This should not, however, preclude the development of such measures as EU carbon taxes for ecological purposes, which could provide the Union with additional own resources.)
But was it necessary, or wise, at Nice to reject out of hand related Commission proposals, such as the harmonisation of tax fraud measures? This understandably annoyed the Commission. In making this point I am not attributing the Commission's decision to censure our Budget measures to its irritation with hard-line Irish opposition at Nice to even the most minor changes in EU decision-making on tax issues.
Notwithstanding Dan McLaughlin's defence of the Budget in yesterday's Business This Week, the Commission had no choice but to censure such a dangerously expansionist measure, introduced in an economy that is clearly overheated and growing at an unsustainable rate of almost 9 per cent a year.
The thrust of this Budget was flagrantly at odds with common sense and with the EU guidelines that Charlie McCreevy had endorsed - and by which he was bound. To have failed to make this censure move would have been a gross breach of trust by the Commission.
Mary Harney's appeal for us to pre-empt criticism by calling on us to wrap the green flag around us in defiance of big bully Commission was misplaced. On an issue of this kind it was not sensible to seek thus to mobilise defiance of the European Commission - which is ultimately our bulwark against exploitation by larger states.
The best course for a government that has got itself into this fix would be to drop the cock-a-snook approach adopted by Charlie McCreevy and instead, in suitably measured terms, to make the best case it can along the lines that the Irish economy is at present quite uniquely placed - there is no precedent elsewhere for its recent performance - and that perhaps we all should await the eventual outcome of the Government's strategy.
For there must, after all, be an outside chance that with exceptional luck, and if everything goes right, McCreevy's gamble might succeed.
There remains the danger that a government might be deluded by yesterday's public opinion poll into ignoring domestic and external expert opinion and seeking to win political support with yet another expansionist budget next October. That could be disastrous. In fairness, Charlie McCreevy has said he would take what the EU had to say into account in the next budget. He must be held to that.
Note: Last week I made the egregious error of referring to the official "rate of .787564 euros to the punt", when I should of course have said the official conversion rate is 1 euro = £0.787564". Sorry.
gfitzgerald@irish-times.ie