Danish lessons for the UK, and in particular Northern Ireland?

Reading this article by Fintan O’Toole got me thinking about my other country, Denmark. The Kingdom of Denmark isn’t just Denmark proper, it includes two other autonomous countries as well. Only Denmark is in the EU.

Just saying.

Update: a researcher in Aalborg who actually knows something about Greenland had much the same thought as I. And they are practical people up in northern Jutland.

21 replies on “Danish lessons for the UK, and in particular Northern Ireland?”

While well-intentioned, any campaign to keep N. Ireland in the EU is doomed to failure unless it is broadened to include Scotland. History has shown that the London government barely gives N. Ireland a second thought. The Irish government should invite the Scottish government for talks asap to work out a joint strategy. The core of the strategy should be that Ireland vetoes any deal between the UK and the EU that forces N. Ireland and Scotland out against their will. And, given the huge number of Irish and Scottish votes in the USA, they should make it an issue in this year’s election.

Kevin the Isle of Man is not a member of the EU but enjoys tariff-free trade without free movement, so this could be a model for Brexit. They are not members of UEFA so there is no international football team. This would be OK for England, but a problem for Wales. Your suggestion needs more work.

In Ireland it can be dangerous even to think out loud, but my dream is a confederation, or even closer union, of Ireland, Northern Ireland and Scotland, with Scotland and NI piggybacking on the Republic’s EU membership. The beauty of this would be that the presence in the entity of millions of Scots sharing their traditions could make the arrangement palatable to Ulster unionists. The combination would have a population of nearly 12 million, and the total size of the economy would be significant in European terms. We could call it the Celtic Union. But let’s not even speculate on where the Parliament or Assembly or other institutions might be located!

Sadly, I don’t think the Danish model helps. A state can be in the EU, sitting on the council etc with a region outside the EU. But I cannot see how it can work the other way around

There are few rules that are iron in both legal and political terms. The fact that the EU is made up of nation states is one of them. It may be that particular solutions will be worked out for particular regional circumstances in the context of Brexit but this can only be done in negotiation BETWEEN the states in question. (It is a pity that it has already taken two major foreign policy stumbles for this to even, seemingly, begin to register where it matters.)

Whatever about the medium term consequences, Brexit is prompting a significant policy easing in the UK. The BoE has today reduced the amount of capital banks need to hold in their counter cyclical capital buffers, in an attempt to boost credit supply, and this follows Carney’s recent indication that rates are likely to fall. On fiscal policy, Osborne has abandoned his target of a balanced budget by 2020 and is flagging the prospect of a significant cut in corporate tax rates. The UK would also be free to ignore EU rules on State aid to industry.Sterling’s fall also represents a policy stimulus, although there is surprisingly little evidence that a weaker currency boosts exports ( see http://www.voxeu.org/article/limited-role-exchange-rates-export-competitiveness).
On the negative side a number of property funds have suspended redemptions in the face of investor withdrawals. It also appears that Spain and Portugal are likely to face EU sanctions later this week for breaching the fiscal rules.Timing is all.

I have to say that DOCM toeing the Juncker line is hilarious. And minimising the damage done in the bailout brings it to another level of comedy.

Talk is cheap and Osborne will be gone soon.

The reality is that the UK budget deficit in coming years is going to be enormous and its debt/GDP ratio is likely to go sailing well above 100% (it was already forecast to go close to 100% pre-Brexit). It was £74 billion (about 4% of GDP) last year and actually rose y-o-y in April and May. That was before Brexit. Recent events make it likely that the budget deficit will rise to £100 to £120 billion by 2018. The new leadership of the UK is more populist and will abandon all attempts to reduce the deficit. Osborne has admitted as much. It will respond to economic weakness and uncertainty resulting from Brexit by going on a spending spree and printing money like nobody’s business. Throw in the 7% balance-of-paymets deficit and we’re talking about a real financial crisis and an unprecedented plunge in £sterling. There will be claims of a mass shopping exodus to Newry. But, this will only bring a temporary improvement in competitiveness. Based on past experience (both historical and during the more recent period 2008-2012), within a year UK inflation will be soaring, eroding the gain in competitiveness resulting from the exchange rate. Within 3-4 years it will be totally eroded. Its already started. A few weeks ago I booked a holiday in Iceland (paid in £sterling) for the last week of July. Today I got billed for an extra £150 to compensate for the collapse in the exchange rate. I checked the small print and they’re within their rights. More fool me for not anticipating this.

But, I’m not the only sucker. Those who lent money to HMG at virtually 0% interest a few months ago have been well and truly screwed. Thank God I moved most of my own savings south of the border in 2007. The £sterling is down 25% v the euro since then and likely to go further. A question for the future is who will finance the UK’s twin deficits? Given these deficits and the outlook for £sterling, anybody who lends money to HMG at virtually 0% interest is completely mad.

As for Ireland’s response, yesterday’s exchequer figures show Ireland heading for a zero deficit this year, maybe even a small surplus. It also has a large balance-of-payments surplus. The UK’s huge deficits on both scores means its in no position to start a tax war with Ireland or with anybody else. Ireland should keep increases in public spending to a minimum and use the fruits of economic growth to cut taxes, including business taxes. As Ireland is in a far stronger fiscal position than the UK, it should cut Corporation Tax by the same amount as the UK (although given its huge deficits, I very much doubt if the UK cut in Corporation Tax will ever materialise).

We may huff and puff but we will not blow down a world order which has endured since the Peace of Westphalia (1648). To quote the Wiki (apparently quoting Henry Kissinger) “The Peace of Westphalia established the precedent of peaces established by diplomatic congress, and a new system of political order in central Europe, later called Westphalian sovereignty, based upon the concept of co-existing sovereign states. Inter-state aggression was to be held in check by a balance of power. A norm was established against interference in another state’s domestic affairs. As European influence spread across the globe, these Westphalian principles, especially the concept of sovereign states, became central to international law and to the prevailing world order.”

The “prevailing world order” is not about to change and allow parts of existing states to be moved around without their express consent.

States break up during the end stage of economic cycles , DOCM. The 1870s crash featured the transfer of Alsace to the German empire. The 1910 or so crash resulted in the breakup of 3 European empires viz Habsburg, Ottoman and German. Territorial integrity means nothing especially in Europe. The 1929 crash eventually resulted in the end of German sovereignty east of the Oder. If people want to change political arrangements they will. The Treaty of Westphalia is a non sequitur.

You could have said the same about Ireland’s position in the UK up to midday, Easter Monday, 1916. Indeed, had this blog been around then, you probably would.

My own view is that the Scottish parliament should simply declare independence asap (this afternoon, if possible). In present circumstance, the London government will neither have the inclination nor the means to do anything about it.

But, if they lack the confidence to follow the 1919 Dail in so doing, another referendum is inevitable, quite probably before the UK has Brexited, with an excellent chance that they will vote for independence. Once Scotland goes, N. Ireland inevitable goes soon after.

“Ireland should keep increases in public spending to a minimum and use the fruits of economic growth to cut taxes, including business taxes. As Ireland is in a far stronger fiscal position than the UK, it should cut Corporation Tax by the same amount as the UK”

If this is Ireland’s response, then who is to pay the shortfall in exchequer revenue that follows? Are you proposing an increase in personal taxation, property tax, vat, etc. Which is it to be?

I concede, on this issue that you are on the same, my pocket first please, page as the American Chamber of Commerce in Ireland, whose view is expressed in today;s Irish Times, ( with a nice photo of Fergal O’Rourke, board member.)
“The chamber warned that the 12.5 per cent corporation tax rate is “by no means sufficient” in ensuring the protection of investment flows.”

[The article is worth a read just to brush up on the multitude of tax cutting gimmicks that such companies and their executives are already in receipt of]

When exactly and where exactly is this tax-free bonanza for multi-nationals and their executives going to stop. Is there no end to it, or must Ireland, and indeed the entire western world, declare itself a tax haven for the all corporations and wealthy individuals?

Frankly, O’Rourke and the American Chamber should be utterly ashamed of the unbridled greed displayed, knowing as they must, that every cent into their pockets, is a cent taken from the pockets of people who can ill-afford to have it taken.

Your own call for lower business taxes, to counter a UK move in that direction, is also self-contradictory, as in the same comment, you state the UK cannot afford to reduce any taxes due to its dire economic state. So why should Ireland follow the UK down a UK tax cutting route that will bankrupt its own economy? Or does Ireland intend to beat the UK in the race to bankruptcy by foregoing all business taxes, and destroying whatever modicum of political legitimacy remains.

I am talking about the relative fiscal positions of Ireland and the UK and their relative scopes for tax reductions.

Ireland’s current fiscal position is much better than the UK’s. Ireland will have a budget deficit of around 0% this year v 4% in the UK. The target for Ireland in 2016 is 1%, but Monday’s exchequer figures showed its running well ahead of target. That’s a 4% difference in the two countries’ budget deficits. In addition, the trend is much better in Ireland. Now that post-Brexit the UK is abandoning all fiscal targets, the difference between Ireland’s budget deficit and the UK’s will widen significantly, maybe hitting 6%-8% in the next couple of years. Ireland already has a massively better balance-of-payments situation the the UK and, given the fall in £sterling, likely to have much lower inflation than the UK in the next few years. So, on the 3 main measures used to measure financial stability (budget deficit, balance-of-payments deficit, inflation), Ireland is likely to score much better than the UK on all 3 for the next few years, maybe even for a decade.

All this being the case, the UK is in no position to undercut Ireland’s business tax regime. There is no need for Ireland to be intimidated in the slightest by suggestions (and all they are is suggestions) that the UK will move in that direction. Ireland can easily match whatever the UK does. Given the size of the looming UK budget deficit, I doubt very much if it will reduce business taxes at all. Its fiscal position is likely to move post-Brexit from ‘very bad’ to ‘absolutely horrendous’. George Osborne said pre-Brexit that taxes would have to rise if the electorate voted for Brexit. They did, and now George is saying that taxes can be reduced. Its all nonsense. If the UK doesn’t go ahead and cut business taxes (as I suspect), there is no need for Ireland to reduce them either, But, if the UK does go ahead and cut them, Ireland should match their cuts, which will cause little problem given that it is moving into surplus. Ireland now has a large fiscal space (the new buzzword among economists). The government stated recently that it would use this space in the ratio 2:1 in favour of spending increases v tax reductions. If the UK does go ahead and cut business taxes (despite its worsening fiscal position), Ireland should reverse this ratio to 2:1 in favour of tax reductions (including business tax reductions).

Breaking newz:

The Tories can’t find Article 50.

Boris apparently lost it during a recent cricket match …. and Blind Biddy picked it up on eBay for a song!

And she is holding on to it.

This proposal is totally lacking in credibility, not least because it contains two obvious basic howlers. First, the Schengen Agreement is about the removal of physical controls – both on persons and goods – at borders, not the control of immigration although, of course, it brings into the frame the issue of the control of the external border of the bloc of countries that make it up. Second, as has been made clear by the Commissioner responsible for trade negotiations, such a negotiation with the UK can only take place after the UK has left the EU, the arrangements for negotiating the UK’s withdrawal being dealt with under a different article of the TFEU (Article 218.3), as specified in the now infamous Article 50 of the TEU.

As the experience of the peace process in Ireland has clearly demonstrated, the key formal negotiating relationship is between the sovereign powers involved. This is also the case with regard to Brexit. Any attempts to circumvent this reality can only worsen the possibilities of arriving at ultimate agreement.

Assuming that Rajoy will continue as PM of Spain, it’s unlikely that there will be any concessions to regions – if Catalonia was more confident of joining the EU after independence, it would be more likely that support for independence would rise – remember that the key negative for support for Scottish was the uncertainly on what currency would be used.

As I said above I do not think a “reverse Greenland” can work, much as I would like, especially for Scotland. If Scotland were to remain in the EU as a region, then new British Subject “Scotland” passports would be needed. The Westminster government would be responsible for little there and in this case they would not be happy to continue operating the Barnett formula. Scotland might as well just become independent. In the case of NI the need for London to send pots of money is even greater. I think for NI the aim should be trade relations as close to EU as possible, closer than GB if needed, especially for agriculture, the people there are Irish citizens and have freedom of movement anyway. You might not have regions in the EU but might ascend to EFTA with some local variations. Then also distinct new All Ireland coordination mechanisms for any practical matters not otherwise covered,


Given the macro context I don’t think the currency makes a difference . The Euro is deflationary as is sterling as is the dollar. Debt is off the charts everywhere. Smaller currencies are more likely to be picked off by speculators and hedgies desperate for a bit of profit.

On Aalborg and Jutland


On Greenland option … methinks Catalunya, the Basque Country and a few more …. inc. Eastern Ukraine ….

…. and probably Cork or Kerry Republics. Reaching 27/28 agreements here is a minefield …. Sykes and Picot have retired!

In the interim spose the best we can do is to assist The English with their identity crisis … “Britishness” appears to have lost its mojo.

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