Amidst the early 1990s, German chancellor at the time, Helmut Kohl, asserted that the financial implications of Germany’s unification would amount to roughly €50 billion annually for the initial years, but not exceeding that. Citing Germany’s financial capabilities, he considered there to be “no need for tax increases” to fund this unification. Kohl vowed that, within a brief span, the Eastern region would evolve into “flourishing landscapes”.
Kohl’s true estimation of the unification’s cost remains ambiguous, yet he was resolute in its necessity. Supporters advocating for swift unification, at the time, underscored the expense, whilst those who favoured a more leisurely pace, or those against unification altogether, magnified costs where feasible.
Up till now, approximately €2 trillion has been dedicated towards merging the two German regions, albeit this is merely the trackable amount. Fianna Fáil Senator Mark Daly, claims that “the actual cost is unknown”. He has relied on the German model for the ongoing Seanad investigations he has spearheaded on Irish unity.
Alongside income tax, since 1991, the wealthier segment of Germany has been subjected to a 5.5% solidaritätszuschlag tax. This tax, known as the “solidarity surcharge”, is applied to income tax, capital gains tax, and corporate tax. However, despite the financial burden, there remains no regret surrounding their unification. German President Joachim Gauck stated in 2015 that a majority of Germans felt as though they had “found their place” in this unified nation.
This German case study holds importance for Ireland due to the stark contrasts that emerged post the publication of an Institute of International and European Affairs (IIEA) report on financial implications of Irish unification. Economists John FitzGerald and Edgar Morgenroth suggested in the report that unification may cost upwards of €20 billion per annum sans the present £10 billion (€11.6 billion) UK treasury concession, in addition to the costs of settling UK pension debts. These suppositions faced substantial skepticism. Dublin City University’s Prof. John Doyle criticized the report heavily, stating that it painted the bleakest interpretation of the economic figures. Doyle posited that ultimately, outcomes “would settle somewhere in the middle”, since both Irish and UK governments would supposedly desire an agreement.
Regardless of the rhetoric, Britain has always counted on Ireland as a staunch ally within the European Union, revealing the possibility of using it as a strategic advantage for getting things done within the EU. The prominent role of the subvention is somewhat overstated, as it mainly encapsulates an accounting activity that encompasses Northern Ireland’s public expenses and tax contribution, in conjunction with its proportional share of the UK expenses on areas such as national debt, defence, and foreign affairs.
The major portion of the estimated costs outlined in the IIEA report arises from aligning the public pay and welfare rates of Northern Ireland with the Republic, an action Doyle reckons could be gradually executed. “Should there be no agreement, we simply leave without taking on any debt, ruling out costs to the tune of €10 billion or €11 billion. In such a scenario, the figure would approximately be €4.5 billion”, he added.
The said amount will be revealed as being overestimated as he presumes, the UK government will likely be more inclined to hasten the termination of the yearly subvention. The liability would reach a political precipice when London decides it no longer wants to continue the payment, but such a move is what politicians typically avoid, he claimed. Paying UK pension benefits, which numerous individuals in Northern Ireland have consistently contributed towards, would be much simpler to camouflage in the broader figure, he supposed.
The campaign group, Ireland’s Future, which advocates the necessity for unity planning ahead of a possible referendum in 2030, led the critique against the report. They acknowledged the report as a significant addition to the ongoing debates on a united Ireland. Still, they also dismissed it as presenting the most pessimistic circumstance when the reality is much more fluid. They said the report disregards the monumental potential for growth in Northern Ireland that would result from unification, arguing that its economic dormancy is the direct consequence of its lifeline with London.
Fitzgerald and Morgenroth are not alone in their conviction that the education and productivity challenges plaguing Northern Ireland are severe and ingrained, requiring significant measures to be addressed. Northern Ireland stands as the only region in western Europe where multinational corporations offer lower wages than local small to medium-sized businesses, indicating the prevalence of low-income roles such as call centre and back office positions, as stated by Doyle.
He highlights that wages in the area have shown a consistent decline, with a 1% decrease observed annually. Productivity in the northern region is also found to be lagging, with a 40% difference compared to its southern counterpart, a stark contrast to the equal productivity levels recorded in 1998.
Robin Wilson, who oversees online publication Social Europe, asserts that Northern Ireland’s economy is distraught, an assertion that is not widely understood, particularly within the Republic. Numerous factors contribute to this situation, including the migration of top students to Britain, education-based discrimination and elitism impacting the less fortunate, and the eradication of industry in East Belfast during Thatcher’s reign.
Wilson notes the significant number of closed businesses in Belfast, even exceeding the counts from the height of the IRA bombing period. Mark Daly from Fianna Fáil suggests that preparations for unity should commence, despite disagreements with Fitzgerald and Morgenroth concerning potential future expenses.
He argues that negotiations with Britain should occur prior to any referendums, echoing the lessons learnt from Brexit, and the need for voters to be aware of what they are voting for. He asserts that the unified Ireland should not bear the burden of inherited costs, such as RUC pensions. He anticipates that the British would bargain in negotiations and propose that unified Ireland be accountable for past infrastructure costs in Northern Ireland, given its benefit from it.
However, the Kerry politician warns against the expectation of a detailed account of costs before voting on unification. He believes that the decisions to be made in the future are not just about immediate impacts, but about shaping the lives of the next five generations and beyond.