In Northern Ireland, peace driven by economics

Two fierce adversaries agreed to a power-sharing government just hours before a London-set deadline.

from the March 27, 2007 edition

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A number of factors lie behind the seismic political shift, analysts say. First, the republican movement recognized it could not win a violent struggle and so, over a number of years, disarmed, forswore violence, and decided to seek its aims through political means. Secondly, voters have repeatedly signaled that they want peace, and only a tiny fraction now vote for parties who reject the peace process.

Economic factors are also in play: Britain has dangled carrots and sticks in front of the parties. British treasury chief Gordon Brown offered an extra £1 billion ($1.97 billion) if a deal was struck; a failure to meet Monday's deadline would, however, have resulted in a punitive water-tax bill landing on doormats across the province.

As a result, sectarian enemies tend to see eye to eye on economic matters. Strikingly, one of the things that Paisley and Adams quickly agreed on Monday was the need to go back to Mr. Brown and seek a bigger financial package.

"Northern Ireland is massively dependent on the exchequer compared to the rest of the UK," notes Professor Patterson. "This has to change and that is the main challenge facing all the parties."

The obvious place to start looking is south of the border. The Irish government is contributing £400 million to help develop infrastructure around the border regions. A divided highway to Donegal in the northwest is to pass through Northern Ireland, offering regeneration prospects. A £7 million funding package has been advanced to expand Derry airport in Northern Ireland.

"Cross-border cooperation is crucial to the development of the northwest," says Niall Blaney, a member of the Irish parliament. "The investment in Derry City Airport, an electricity interconnection, and a proposed single electricity market are just some of the ways we are trying to work together in the interests of everyone on this island."

But one of the biggest impediments to inward investment in Northern Ireland is the high rate of corporate tax – 28 percent, which is uncompetitive compared with the 12.5 percent rate in Ireland. Brown is investigating the possibility of aligning the tax rates in Northern Ireland with those of the Republic.

"That won't happen," says Basil McCrea, a member of the Belfast Assembly, who claims that any taxation change would lead to demands from Scotland or Wales for similar preferential treatment. He adds that the incoming government will face critical economic questions, such as a ballooning 18- to 24-year-old population and the need for 180,000 new jobs in the next 10 years, at a time when manual employment is falling.

"We need to get the entrepreneurs generating jobs and wealth," says Mr. McCrea. "That's the key, and it comes from people rather than governments."

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