In 2011 the Irish central bank was forced to deny claims that they were preparing to print Irish punts in the case of a collapse of the Eurozone. This came after reports in the Wall Street Journal that the bank was evaluating the need to increase their number of printing presses in the event of a return to the Irish Punt. While the central bank denied these claims, political developments on the continent and the events that have shaped the recent economic history of Ireland, suggest this was a missed opportunity.
5 years after the foundation of the state, the currency commission was established, tasked with creating an Irish currency to replace sterling. The commission paid particular attention to the aesthetic style of the punt. Artist Robert Ballagh designed many of the iconic Punt notes and coins. Discussing the introduction of the Euro to Ireland, Ballagh bemoaned the aesthetic de-nationalisation of the currency “I think a lot of people thought the euro was going to have an Irish feature and they are disappointed when they find out that while the coin will feature a harp on the back, the note will bear nothing of any national significance.” In contrast, the Punt was adorned with national symbolism, from Lady Lavery and Gráinne Mhaol to native animals. The Euro ushered in an aesthetic of soullessness – with the notes deliberately designed to lack identifiable national characteristics.
While Ballagh noted the “dramatic” cultural impact of the introduction of the Euro into Ireland, the new currency also represented what was possibly the largest abandonment of sovereignty since the foundation of the state – control of monetary policy.
Prior to the adoption of the Euro, the Irish Central Bank had the power to set interest rates. This meant that the Irish Central Bank, during times of economic growth and high employment, would be able to increase rates to prevent inflation and unsustainable growth. Conversely, in times of economic hardship, the ICB would be able to lower rates to increase investment into the economy and stimulate economic activity. However, the adoption of the Euro meant that the power to set interest rates was seeded to the European Central Bank. The problem with this is that the economy of the European Union is wildly diverse – so the economic interests of member state countries remain wildly divergent. The impact of this was probably hardest felt during the European Sovereign Debt crisis, when the Irish economy began to deteriorate and unemployment increase, the ECB inverted the traditional Keynesian economic model described above by increasing interest rates twice in 2011 under Jean-Claude Trichet to mitigate investors’ fears over insolvency and inflation.
Arguably these decisions betray a bias in the ECB towards the Northern European countries, in particular Germany, with the Euro originally being pegged to the Deutschmark. As the deflationary measures of the ECB contributed to higher unemployment and mitigated economic vibrancy in Ireland, the same period was marked by prosperity in Germany.
More recently, the ECB has demonstrated how its impact on a nation’s sovereignty is not only confined to monetary policy. In the lead up to last years’ French parliamentary elections, with Le Pen’s National Rally leading in the polls, the ECB effectively threatened Le Pen over her proposed populist policy platform. Right before the election, the ECB threatened to punish France over its deficit and debt rules in a process that would lead to fines for the French state. As the French column inches began to be populated by warnings of an impending economic meltdown in the event of a right-wing victory, the ECB claimed that it would not purchase French debt to calm market volatility. As Theo McDonald noted “The message from the financial elite is clear: vote the way we want, or your economy will collapse.”The power imbalance between sovereign states and the ECB owing the secession of monetary policy is not something new to Ireland either. In 2010, the ECB threated to cut off funding to Irish Banks unless Ireland immediately applied for a bailout, committed to austerity policies and bank recapitalisation.
Perhaps countries maintaining their own currencies is indicative of an ethic of Governance that means they tend to pursue their own path, but it’s not lost on me that the European countries that do not have the Euro have much greater breadth and diversity to the policy agenda they pursue in comparison to their Eurozone counterparts. For example, Hungary maintains the Forint but also has a unique style of foreign policy which has allowed it to avoid being entrapped in the bloc style geopolitics that characterises much of the western world. Likewise, Denmark maintains the Krone and saw it’s left-leaning Government develop a strong position towards migration, ahead of the curb of most other European countries.
Nearly a quarter of century on from the introduction of the Euro, the return of the Punt feels like an asinine cause – but it is a cause that is central to strengthening Irish sovereignty. And perhaps most importantly, the Punt just looks a lot better.
Dean Céitinn