March 10, 2013 6:14 pm

Britain warned by Dublin over Europe exit

Enda Kenny, Ireland’s prime minister, will on Monday urge David Cameron to do all he can to keep the UK in the EU, amid growing fears in Dublin that the planned referendum by 2017 could have disastrous consequences for Ireland, Europe and Britain.

Ireland, which holds the rotating presidency of the EU, is well placed to win foreign investment projects discouraged from locating in the UK because of uncertainty caused by Mr Cameron’s referendum pledge. But senior Irish political and business leaders believe “Brexit”– UK departure from the Union – would be hugely damaging to Dublin’s wider political and economic interests and its relationship with Northern Ireland.

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“We want to keep our ports and gates of business open to and from Britain. That would be of such fundamental importance for us here and for them, because of their exports to Ireland,” Mr Kenny told Irish members of parliament ahead of his visit to the UK when he will meet Mr Cameron and deliver a speech at the London School of Economics.

British-Irish bilateral relations have never been better because of the success of the Northern Irish peace process, as well as bilateral trade worth more than €50bn a year and close co-operation at EU level. But Dublin is becoming increasingly anxious that domestic politics in Britain could lead to an “accident” that sees the UK leave the Union.

“Yes that is possible,” said Eamon Gilmore, Ireland’s deputy prime minister when asked if he felt a referendum on EU membership could be lost. “What can often happen in a referendum is you get a number of issues coalescing which can add to the No vote,” he told the FT.

Ireland’s voters have rejected two EU referendums over the past 12 years only to change their mind when asked on a second occasion.

Mr Gilmore said five years is an extremely long time to have uncertainty surrounding the UK’s relationship with Europe and warned the “clock wouldn’t stop” in Europe while London pondered the question.

Peter Sutherland, a former director-general of the World Trade Organisation and European Commissioner, said the prolonged period of uncertainty about the UK’s EU membership could damage British interests.

“This will contribute to its marginalisation and could pose some threat to inward investment,” he said.

Ireland’s ultra-low 12.5 per cent corporation tax rate makes it an attractive location for foreign investors in the technology, pharmaceutical and medical device sectors. Dublin also has the International Financial Services Centre (IFSC), which markets itself as a low-cost alternative to London within the eurozone.

John Bruton, a former Irish prime minister who is now president of the IFSC, said Ireland could capitalise on uncertainty caused by the UK’s referendum pledge as investors questioned whether a UK operation would remain compliant with EU regulations.

“In the long term if you are in doubt about whether the UK is in or out of the EU, then it could be much harder to attract investment to Britain,” he said.

On the margins of a British-Irish parliamentary assembly meeting last week in Donegal, most delegates warned a UK exit from the EU would be very damaging to Ireland and the UK.

“An UK exit from the EU would produce huge complications to cross border trade – you can just imagine trying to put in place bilateral arrangements,” said Steve Aitken, chief executive of the British-Irish Chamber of Commerce. “Businesses don’t recognise the national boundaries that politicians do and are extremely integrated nowadays,” he said.

Terrorists also do not recognise borders. Ireland’s justice minister and his counterpart in the Northern Ireland executive have warned London about the danger of opting out of key EU counter terrorism measures such as the European arrest warrant.

Concerns about the possible reintroduction of border controls between Northern Ireland and the Republic, if the UK exited the EU, have also been expressed.

“Ukip has been pushing its desire to exclude Romanians and Bulgarians from entering the UK. To do that you would need to reintroduce border controls,” said Mr Bruton.

Dublin and the more liberal EU states would also lose a key ally in EU negotiations on free trade and taxation if the UK left the Union.

“Those who believe in a free trade agenda need a big country like the UK on the inside advocating for it,” said Lucinda Creighton, Ireland’s EU affairs minister.

Ms Creighton said Irish ministers were in regular contact with their UK counterparts and would work to bolster the country’s position in Europe during its tenure as presidency of the Union. “We can play a role in articulating to the UK the positives about EU membership,” she added.

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