Dáil Éireann Debate, Thursday - 23 June 2016
1. Deputy Michael McGrath asked the Minister for Finance the steps he has taken to prepare for the economic implications that would arise for Ireland in the event of a possible vote by the British people to leave the European Union; and if he will make a statement on the matter. [17749/16]
View answerI apologise for delaying the House. As we speak in the Chamber, the people of Great Britain are voting on the question of whether to remain in the European Union. Clearly, a decision by Great Britain to leave the EU would have very significant consequences for Ireland in terms of trade, the free movement of people and the land border we have with the Six Counties. I understand that if the decision goes the way we do not want it to go, a Cabinet meeting is planned for tomorrow morning. Perhaps the Minister might give us an outline of what initial plans are in place in the event of a decision by the British people to exit the European Union.
The Government's position on developments in relation to British membership of the EU has been clearly articulated, particularly by the Taoiseach and the Minister for Foreign Affairs and Trade: we very much want the UK to remain an integral member of the Union.
The UK's continued membership of the Union is a matter of strategic importance for the Government. In this regard, Departments, including my own, have been working on this issue for some time.
In relation to the potential economic impact, under the research programme agreement between the Department of Finance and the Economic and Social Research Institute, ESRI, my Department commissioned research on scoping the potential economic implications for Ireland of a change in the EU-UK relationship. The research was published on 5 November 2015 and is an important contribution to understanding the potential issues arising.
The summer economic statement notes that there are a number of risks to the central forecast scenario set out in the 2016 stability programme update and sets out an assessment of the potential economic impact of a vote by the UK to leave the EU. The scale of the impact would, of course, depend on the agreement entered into between the EU and UK following such an outcome. The prudent and consistent economic and fiscal policies, which have been the basis for our economic recovery, have resulted in a greatly reduced general government deficit and debt ratio, which means we are better placed to deal with the type of risks arising.
As the Taoiseach has said, Ireland will have a clear plan in place to deal with the implications, including the economic implications, of a UK vote to leave, if that is the outcome. The key priority for Government would be to protect and promote Ireland's interests to the greatest extent possible in the event that the UK votes to leave.
Based on the analysis carried out by all Departments, including the Department of Finance, a framework has been developed on a whole of Government basis to identify contingencies that may arise in the days, weeks and months that follow the outcome of the UK referendum.
I thank the Minister for his response. Clearly, we are speaking about a hypothetical situation, but it is a distinct possibility. The opinion polls have been quite mixed in recent days in terms of what the outcome is likely to be. The fundamental pillars of the European Union are the free movement of goods and services and of labour, so for us as a country the key issues that will need to be dealt with from a trade perspective are the possibility of trade barriers and tariffs being put in place and the free movement of labour between the UK and Ireland. If there is a Brexit, there will be a period of uncertainty and one of the key questions is whether it would be possible for the UK and Ireland to enter a bilateral agreement or if it would be a multilateral agreement, involving the remaining 27 countries of the European Union. I assume that is an issue which the Minister's Department has examined. I know the summer economic statement looked at the economic impact of a Brexit and it is an estimate, it is a forecast, and nobody can be certain what the fallout will be. There seems to be a great deal of analysis, but are there steps we are planning to take in the very short term if it is a negative vote?
The immediate foreseeable effect would be the effect on the movements of money in the markets. In that context, I have had discussions with the Governor of the Central Bank and he has assured me that the Central Bank, in the context of discussions with the European Central Bank in Frankfurt, has all the necessary measures in place to deal with any contingency of that nature. Beyond that, the legal mechanism for a British withdrawal is enshrined in the treaties. There is a two-year period before the withdrawal - if that were the outcome of the vote - would be activated, so issues like the free movement of people, whether there would be trade barriers or if there would have to be posts to secure the land border with Europe, as it would be then, 60 km from Dublin, would be discussed over a two-year period.
The negotiations, on the face of it, would be between the European Union and the United Kingdom and it would be the European Union that would be doing the negotiation, but if one takes an issue like the free movement of people, that has been in place as a legal issue since 1922. It was reinforced legally when the Republic was established in 1949 and since it pre-dated the entry of the UK and Ireland into the European Union, I would be of the view that there is a strong legal argument that the status quo ante could prevail.
I thank the Minister for his clarification of the Governor of the Central Bank's comments and the plans that are in place in respect of the money markets and the fallout from a possible vote by the UK to depart from the European Union. The Minister has touched on the central issues. While the free movement of people may be preserved, does that extend to the free movement of labour? People's ability to move is one thing, but will they be able to move and take up employment within the law that would apply to the UK and the European Union? That is an outstanding question.
From a trade perspective, while there may be benefits in terms of foreign direct investment, that is purely speculative, but there would undoubtedly be very large negatives for many indigenous firms here that are dependent on the UK export market. We are at one in hoping it is a vote to remain, but if it is not, there will be very significant consequences, which the Government and the country will have to face up to.
I share the Deputy's concerns. To put it succinctly, the downside is definite and the upside is speculative, so obviously I am on the remain side and I would like very much if that is the way it goes. We have provision for what is foreseeable tomorrow and in terms of the other negotiations over a period of time, I am sure we can share information with the Deputy as time goes by.
