A united Ireland could cost €8 to €20 billion a year but could be offset in the future by the benefits of integration into the EU economy, a new report has suggested.
The study – which comes from the Institute of International and European Affairs (IIEA) – bases its costs on pre-pandemic figures from 2019, which would be higher today.
It finds that a united Ireland would in the beginning put “huge financial pressure” on the public, resulting in “an immediate major reduction in their living standards”.
To deal with the costs, which would continue for years after unification, there would have to be a substantial increase in taxation coupled with a major reduction in expenditure in the south.
However, the report acknowledges that some of these costs would be offset by the wider benefits of integration into the wider EU economy in the future, cautioning that this would take “some considerable time”.
Speaking on RTÉ’s Morning Ireland, report co-author and co-chair of the IIEA Economists Group, Professor John FitzGerald described the potential €20 billion cost as similar to “a third of a bank bailout every year”.
“The solution is if Northern Ireland dramatically changes how they run their economy, in particular in the educational sphere, which would mean that the gap between the north and the south would narrow and also that their revenue would rise substantially more.
“Looking for somebody else to pay for unification is not going to happen. If it happens, we’ve got to pay for it ourselves,” he said.
The authors argue however that if Northern Ireland were to make major changes to its economy with the aim of “dramatically” raising productivity, it could “substantially reduce the cost of unification”. This would be as a result of narrowing the gap in living standards between Northern Ireland, the rest of the UK and Ireland, which would reduce the north’s deficit.
If Northern Ireland chose to remain as part of the UK indefinitely, a reform of its economy would “greatly enhance” its economic position within the UK regardless, which would see “a substantial improvement” in its standard of living.
The report goes on to conclude that even under the most favourable circumstances, it will be at least two decades before the productivity gap can be substantially narrowed.