Ireland faces its doomsday scenario

Both sides of Ireland are in a panic because Brexit could make the peace process unravel. But perhaps the North has come far enough to allow a non-violent reunification of the island.

"Of all the things that could happen to an Irish government short of the outbreak of war, this is pretty much up there with the worst of them," wrote The Irish Times, the republic's main newspaper, as the world woke up to the "Brexit nightmare" on Friday morning.

"Ever since David Cameron announced that he would hold a referendum back in 2012, Irish officials have regarded the prospect of a British exit from the EU as the worst thing that could happen [to Ireland]," the paper wrote. "[Irish PM] Kenny now faces leading Ireland through a period of difficulty and uncertainty unprecedented in the last 50 years, more complex and unpredictable than the recent financial crisis, more destabilising the Northern Troubles."

The UK is Ireland's biggest trading partner. One billion euros worth of goods flow freely across the Irish Sea each week, tariff-free because both countries are in the European Union. If the UK leaves the EU while the Republic of Ireland stays in, customs duties will have to be imposed on that trade. That is, unless the UK joins the EEA, but I've written before on why that is unlikely.

This isn’t about the UK any more

The markets have returned to panic mode today as their confidence in national governments to approve the new Eurozone financial consolidation treaty wavered. Ratification has hit some bumps in the road, with Finland’s prime minister expressing dissatisfaction with the transfer of authority over national budgets to the EU on Tuesday. In Ireland, the opposition parties seem keen to force a referendum on the issue even if the country’s legal services rule that one is not required.

The euro fell below $1.30 today, its lowest point in a year. Yields on Italian bonds widened to new highs. It’s a familiar pattern we’ve seen repeated several times now: markets rally upon news of a new European Council agreement, but then crash a few days later when they look at the details and realise it’s not as strong as they’d hoped. The UK's abandonment of Europe may have been the big story on Friday, but now the more important story sets in - the markets have not been satisfied.

But there seems to be some confusion in the British media though about what this all means vis-à-vis the UK’s decision to veto the attempt at treaty change on Friday. The Spectator has run a column from the Eurosceptic think tank Open Europe scolding the British media for describing the UK as isolated as a result of the 26 vs. 1 outcome last week. There isn’t really any such divide, Open Europe insists, because many other member states support the UK’s reticence. As evidence that all is not what it seems, they run through the list of objections to the new treaty being expressed in national capitals this week.

Ireland's dramatic fallout with the Catholic Church

The Vatican took the unprecedented step of recalling its ambassador to Ireland on Monday following a fiery speech from the country's prime minister denouncing the church for covering up cases of child sex abuse. The row is an indication of just how much Ireland, once a loyal foot soldier for the pope, has changed over the past two decades.

The fiery speech on the floor of the Irish Parliament by Prime Minister Enda Kenny last week was in reaction to the government's latest report on sex abuse in the Irish church. The report found that the Vatican had deliberately tried to downplay and cover up the rape and torture of children by priests in Ireland, and found that it was doing so as recently as 2009. It also found that the Vatican was trying to interfere with the Irish government's investigation into the matter. This was apparently all too much for Kenny. Denouncing the "dysfunction, disconnection, elitism and narcissism" of the Vatican, Kenny told the parliament:

"This is not Rome. Nor is it industrial-school or Magdalene Ireland, where the swish of a soutane smothered conscience and humanity and the swing of a thurible ruled the Irish-Catholic world. This is the Republic of Ireland 2011. A republic of laws, of rights and responsibilities; of proper civic order; where the delinquency and arrogance of a particular version, of a particular kind of 'morality,' will no longer be tolerated or ignored."

He likes us, he really likes us!

Barack Obama has just concluded an unprecedented address to both houses of the British Parliament in Westminster Hall, and the British press is already elated. He's the first US president to ever give a speech in this ancient coronation spot of kings and queens. From the adulation being heaped upon him by the British press, one might think Obama had a coronation of his own. But the reaction shows just how much the British, and Europe in general, needed to hear those three magic words from the US president- 'I like you'. After a series of snubs, Europe was beginning to doubt his affection.

Today's speech was the key communication of Obama's six-day, four-nation European fence-mending (and domestic politicking) tour. The centerpiece is tomorrow's G8 meeting in Deauville, France. But today's visit to the UK was all about reassuring the Brits that they still enjoy a 'relationship' with America - though the exact nature of that relationship seems to be being redefined.

The British press and political class spends an inordinate amount of time fretting about whether their country still has a "special relationship" with the United States. In the US, this term is virtually unheard of (which should answer their question). Earlier this year the British media was sent into a tizzy when Obama said during a state visit by French president Nicolas Sarkozy, “We don’t have a stronger friend and stronger ally than Nicolas Sarkozy and the French people.”