Ireland: Ahern's final day

Tuesday, May 6

Bertie Ahern steps down today as prime minister of Ireland to be replaced by current Finance Minister Brian Cowen. Later this week, his Northern Ireland counterpart, Ian Paisley, resigns as first minister of Northern Ireland to be replaced by his finance minister and long-time deputy, Peter Robinson. The quasi-simultaneous handovers raise questions about the future of the north-south relationship.  

• Political similarities. Paisley steps down later this week after a major investment conference in Belfast, which will signal significant US investment initiatives. Like Cowen, Robinson is an experienced politician, who commands respect rather than admiration among the electorate. As finance ministers, the two formed a positive personal relationship.
• Economic integration. Last month, Cowen announced that the Irish government and its financial regulator would look favourably upon financial services companies currently based in the International Financial Services Centre in Dublin that wished to set up satellite operations in Belfast. In effect, this means that financial service businesses can operate in Northern Ireland and recruit skilled personnel currently scarce in Dublin. They would continue to pay profits tax at the Irish 12.5% rate. This imaginative arrangement, negotiated bilaterally by Cowen and Robinson, augurs well for future economic cooperation between Belfast and Dublin over infrastructure investment and attraction of inward investment into an increasingly integrated island economy.

Ireland's favourable public finances and potentially mutually advantageous economic cooperation with Northern Ireland provide some buffer against recession and political instability in the short term. However, in the longer term, there are concerns about competitiveness in both parts of the island and, if the world economic downturn persists, the Irish government may come under pressure to adjust public investment to more sustainable levels.