Minister for Finance Michael Noonan TD Statement to Dáil Éireann on Brexit

05.04.17

Introduction

Every member of this house will agree that Brexit presents major challenges for Ireland, given the potential implications for the economy and trade, the Northern Ireland Peace process, the maintenance of the Common Travel Area and the future of the EU.

These are the Governments priorities and we have been preparing solidly to defend these over a long time.

Our preparation to date includes extensive analytical work carried out before the UK referendum, and intensified analysis and scenario planning carried out across all key sectors since the referendum. This is coupled with extensive stakeholder consultation and engagement to ensure that Ireland’s concerns are well understood.  

In this context, we are pleased that the draft Brexit Article 50 negotiating guidelines circulated by President Tusk last week include very strong acknowledgement of Ireland's unique circumstances, the need to protect the peace process and the Good Friday Agreement, and our intention to maintain bilateral arrangements with the UK like the common travel area.

We will, of course, study the draft guidelines carefully in terms of the overall approach to the negotiations and the many other issues that arise, beyond those unique to Ireland.

We are ready for the negotiations. We will negotiate firmly and fairly, as one of 27. The Government is under no illusion about the nature and scale of the Brexit challenge. We know that because of our close economic ties, any negative impact on the UK economy in the medium term could have potential implications for the Irish economy. However economically and administratively Ireland will be ready for optimal engagement in this process.

Ireland will be seeking a positive, constructive and orderly outcome. The Government will continue to engage in the best interests of the country and citizens.

Brexit Economic Impacts

Before turning to examine the economic issues around the Brexit negotiation, let me re-iterate Ireland’s commitment to the EU. As a member since 1973, we have benefitted enormously from our membership and the Government believes that our future prosperity and well-being lies with continued membership of the EU.

Let us not forget what the economy was like prior to 1973; our EU membership has been central to the success of our open, trading and competitive economy.  Access to the Single Market has allowed a small open economy like ours to prosper. It has been central to our twin strategies of attracting inward investment and helping Irish-owned companies diversify their markets. Moreover, EU membership has given us full access to EU trade agreements with other major markets and a capacity to engage in global free trade that we could not possibly have on our own.  

There is no doubt, however, that Brexit represents a serious and direct threat to our economic prosperity. Overall, the Irish economy remains highly reliant on the UK, as a trade partner the UK accounts for around 16 per cent of exports.

Given the close economic links between Ireland and the UK, any negative development in the UK economy in the short to medium term is likely to have spill over effects to the Irish economy. The potential impacts are profound, right across the economy. That is why a key priority in the forthcoming Brexit negotiations is to minimise the impact on trade and the economy. 

We have a two-pronged approach in place to respond to the profound challenge of the UK’s departure - to negotiate hard for the best possible outcome in the negotiations; and to continue intensive work to make the economy resilient and future-proofed. We will work, as one of 27, to secure the closest possible economic and trading relationship between the EU and UK and to prepare the economy to cope with turbulence of coming years and the structural shift of new realities.

Important steps have already been taken to prepare the economy, including the introduction in Budget 2017 of tax measures to support Irish affected enterprises especially agri-business and the Action Plan for Jobs 2017 which has 20 specific actions to respond to Brexit, including to diversify export markets and improve competitiveness.

The Government will remain proactive in developing and adapting our policies in order to ensure that Ireland’s economy continues to remain competitive in the face of future economic headwinds. A key element will be to continue to prudently manage our economy and the public finances to enable us to meet future challenges. 

In Budget 2017, the Government announced the decision to establish a rainy day fund, starting in 2019, once we have achieved a balanced budget in 2018.  This will be both a counter cyclical measure to avoid overheating, and will also enable us to deal with the initial effects of any shock that may occur.

The Government has also decided to set a new domestic target of a debt to GDP ratio of 45 percent to be reached by the mid-2020s, or thereafter, depending on economic growth. This target takes account of the particular risks that Ireland, as a small and very open economy, faces.

Over recent years, Ireland has laid the foundations for a solid and sustained economic recovery. Indicators such as consumer spending and labour market developments are consistent with an economy that is maintaining momentum. We are confident that our economy is resilient and that appropriate fiscal policies are in place to help us to adjust to the economic effects of the UK’s negotiated withdrawal from the EU.

Brexit Opportunities (Investment/Financial Services)

While Brexit will pose undoubted challenges to the Irish economy, there will be some opportunities and the Government will work to maximise those where possible.

Following Brexit, we will be the only country in the EU that is an English speaking common law jurisdiction. We have a young well educated population and the Government will work to continue a business friendly environment here, for businesses large and small.

We have ensured additional resourcing of Enterprise Ireland and the IDA to help retain, attract and develop businesses within Ireland and to help Irish businesses export to new markets.

In terms of sectoral opportunities, the continued successful development of the International Financial Services (IFS) Sector in Ireland is a priority for the government. The appointment of Eoghan Murphy TD Minister of State with responsibility for Financial Services, highlights the importance the government continues to place on the continued development of the sector especially in the new context of Brexit. Brexit will provide an opportunity as companies will of necessity need to seek new access points to the EU. We are ready to facilitate those needs, and we are actively seeking to maximise those opportunities.

Central Bank ‘Readiness’ for Brexit

A key component of a successful and attractive jurisdiction for the location of financial services activities is a strong and independent regulator, with international credibility.

The Central Bank of Ireland is committed to delivering high quality, effective financial regulation and supervision to achieve its mandate of safeguarding financial stability and protecting consumers.

The Central Bank has a strong commitment to transparency and clarity in respect of its authorisation process, ensuring that all applicants have a very clear idea as to what is expected.

The Central Bank is already engaging with a significant number of firms across all sectors, and has the resources including dedicated professional teams in place to cater for the demand.

Brexit Negotiations 

Turning to the Article 50 negotiations, as outlined previously, the Government will defend our national interests and priorities fully within the established negotiation framework in order to ensure the best possible economic outcome.

For Ireland, that continues to mean the closest possible economic and trading relationship between the EU and the UK.

As the Taoiseach, has stated, that close relationship is in the interests not just of Ireland, but of all of our fellow EU member states.

Given the complexity of the issues involved, it is likely that the negotiations on the future relationship agreement will take longer than two years.  We therefore believe that a transitional arrangement between the exit agreement and the future relationship agreement is vitally important to ensure an orderly exit and to provide certainty for our citizens and our businesses.

Ireland will be on the EU 27 side of the table when the negotiations begin and we will continue to work with the other Member States to ensure that they fully understand and address the nature and scale of the particular challenges for Ireland.

Domestically, we will continue to closely monitor the economic impacts and to frame budgetary policy in the context of the challenges of Brexit.

Conclusion

To conclude, I would reiterate that the Irish economy remains resilient. Government actions over recent years have laid the foundations for a solid and sustained economic recovery.

The Government has put structures and resources in place to ensure that deep analysis is conducted across all sectors, with all Departments and Agencies charged with making Brexit a priority. The challenges that we face as a result of Brexit is mainstreamed across my Department, and we have co-ordination happening at key levels across Government.

Ireland will negotiate from a position of strength, as one of 27 Member States firmly in, and committed to the European Union. We will pursue our national interests and priorities forcefully within the established legal and political framework for the negotiations.

We are entering these negotiations, as a member of the EU 27, with the strong view that an agreement can be reached that caters to the needs of all to the greatest extent possible.