WORLD VIEW/ Paul Gillespie: Gordon Brown's speech to the House of Commons last Monday on British policy towards joining the euro raises once again the consequences for Ireland of what the UK decides. The running Irish consensus that Britain will eventually join the single currency and that this is fundamentally in Ireland's interest is apparently endorsed by Brown's statement.
But there is now a clearer understanding that the hostility of British public opinion and the sluggish state of the eurozone economy could elongate the process well into the medium term.
Besides, the rise of the euro against the dollar and sterling has suddenly exposed the salience of this exchange rate for Irish exports to the UK, which enjoyed a competitive edge because of the weaker euro since 1999. Documents released by the Treasury suggesting sterling could enter the single currency at or near parity with the punt added bite to this debate.
For all Tony Blair's rhetoric about bringing Britain to the heart of Europe there has been precious little hard political campaigning by him or his government to swing opinion around since 1997. Thus, arguably, the most interesting developments this week were the relatively upbeat tone of Brown's remarks and the clear signal from both men, much the most powerful figures in this government, that they are going to mount a prolonged campaign against Euroscepticism to lay the basis for a euro referendum before, or more probably shortly after, the next general election.
They obviously expect other ministers to follow them. Their initiative is also prompted by the need to sell the constitutional treaty finally agreed yesterday by the Convention on the Future of Europe to the voters in the face of unparalleled hostility from Britain's Eurosceptic media.
A hint of their contemptuous tone was contained in Conrad Black's attack on European media attitudes to the Bush administration at the World Association of Newspapers conference in Dublin this week (he is proprietor of the Telegraph group).
While we have been largely spared such garbage in Ireland, Brown's report and the strengthening euro against sterling have reopened a policy debate here on whether it was correct for Ireland to join the euro without the UK. Moore McDowell of UCD economics department, writing in the Irish Independent on Tuesday, said the "real reasons for the single currency had nothing to do with economics in the first place" and that there was little hard statistical evidence for the assumed trade and economic growth commonly associated with the single European market and the single currency.
Quoting a paper by two of his UCD colleagues showing that breaking the punt-sterling link in 1979 had no observable effect on Anglo-Irish trade and noting that this figured prominently in the Treasury's evaluation of whether Britain should join the euro, he said the scoreboard should read: UCD United 2; Europhile Wanderers 0.
It is a common fallacy in the euro debate that politics and economics are two altogether different, virtually incommensurable, spheres. Upon this orthodoxy of neo-classical academic economics Brown based his case that the economic case for the UK joining the euro could be conclusively evaluated against the five tests he set out in 1997.
Blair could agree to separate the political commitment in principle to joining the euro from that economic evaluation. Economists could dismiss the euro as solely a political project, designed to usher in a federal Europe incrementally.
Such a neat separation of politics and economics, together with assumptions that currency sovereignty can be used for active macroeconomic management, presents an unrealistic account of the alternatives available to Ireland and the overall benefits flowing from membership of the euro.
Effectively the choice since 1979, and especially since 1989-90 when negotiation of the single currency began in earnest was between joining the single currency or associating once again with sterling and a close British economic relationship.
This remains the case. To have chosen the sterling option would have broken with the central thrust of Irish public policy over the 30 years of EC membership: to reduce economic dependence on Britain and diversify Ireland's politics, economics and diplomacy in a more independent international role.
Such considerations of political economy override the sharp distinction between economics and politics. They enable us to understand that governing and regulatory frameworks established by political decision are crucial sources of economic welfare and opportunity.
Perception plays an important role. This was visible especially during the Government's resistance to devaluing the punt in September 1992 with sterling, a decision held off for over four months to demonstrate this State's separate interests and commitment to a multilateral EC policy.
The policy framework established in the late 1980s through social partnership, expenditure cuts, cohesion and structural-fund transfers from Brussels arising from the euro decision engendered low inflation and economic growth in subsequent years.
The 1993 devaluation boosted that performance; but so did the multi-annual financial disciplines imposed by the Maastricht criteria, which had cross-party support. Imperfect exchange rates with sterling were more than compensated for by the stability imposed by the glidepath to EMU vis-à-vis other currencies.
Other benefits of participating in EMU include attracting foreign direct investment, cutting transaction costs, and participating in a growing trading arena with global influence. Ireland's successful development in the 1990s has positioned it well to compete in an enlarged EU in which it is becoming a net contributor.
This is not to say all opportunities have been taken. Irish domestically-owned industry was advised to diversify away from overdependence on the British market from the mid-1990s, which it has failed to do. Trade with continental markets has not grown to the extent expected, partly because there has been so much more trade and investment with the US. Cultural relationships with continental EU member-states have not developed enough to sustain extra trade, while relationships with Britain are arguably closer than ever.
Nevertheless, taking account of these issues in the political economy of Ireland's euro membership a more accurate scoreline would read: Europhile Wanderers 3; UCD United 1.