The New Hanseatic League

Dec 03, 2018

The Sunday Business Post, 2 December 2018, The idea behind the Irish name Aer Lingus is that of a fleet or convoy for the air.  There is strength and safety in convoys.  The idea behind the name of the German national carrier Lufthansa, is the same. 

The German word Hansa which originally meant “convoy” has come back into a different type of usage in recent times with the notion of the formation of a new Hanseatic League.  So dubbed by the Financial Times, the new Hanseatic League is an alliance of EU countries, a club within a club, to defend regional interests and economic priorities.  It comprises eight countries - the Netherlands, Sweden, Finland, Denmark, Estonia, Latvia and Lithuania.  And Ireland.

This informal grouping is not a superpower.  With a combined population of some 50 million, it accounts for about 10% of the total population of the European Union.  This is a key statistic when we consider the importance of the qualified majority vote in EU politics.  Unanimity is not required for many EU decisions (including last week’s EU Council decision to ratify the Brexit withdrawal treaty).  Instead all that is required is a qualified majority – the votes of EU countries which when combined represent 65% of the EU population and more than half the countries.  This new Hanseatic League will never be able to achieve such a majority on its own, nor for that matter block a qualified majority vote.

Nevertheless, its formation echoes the ideas behind the original Hanseatic League, which was an alliance of cities in Northern Europe which formed around the 12th century and flourished for the best part of 300 years.  The cities of the Hanseatic League came from several of the modern EU states including Belgium, Germany, the Netherlands, Poland, Sweden and the UK.  If the cities didn't share nationalities, they shared proximity to a vital trading corridor stretching from the English Channel along the north coast of mainland Europe towards the Baltic Sea. 

Their operating premise was simple.  Cities and towns which signed up to the Hanseatic League agreements on taxes (what else) and trading conditions could trade with each other, to the exclusion of other cities and ports along the Baltic route.  It seems that the original Hanseatic league was born out of instincts for self-preservation and the pursuit of profit.

Its modern counterpart has similar instincts.  It may be unofficial, but nevertheless it is recognised as evidenced by the Tanaiste some months ago when speaking in The Hague about Ireland's newfound allies within the European project.  He has “some confidence that the views of our Dutch, Irish and Nordic/Baltic cluster will be heard with increased frequency and effect in our European Union of the future”.

I hope that the Tanaiste’s confidence is well founded because this country needs as many allies as it can get.  Aside from the economic consequences of Brexit, there are political and diplomatic consequences to losing one of the most powerful members of the EU, whose interests coincided with Irish interests, certainly in the tax arena.  The UK was always deeply sceptical of European Commission mission creep, manifested in intrusive state aid rules and decisions and in projects like the EU drive to harmonise corporate taxes across the EU.  That British scepticism meant that Irish interests were frequently aligned with UK interests. 

You don’t need to be a diplomat to appreciate that it's always useful to have a G7 nation with nuclear capability on side.  Brexit means Ireland loses a key supporter at the EU negotiating tables.  The new Hanseatic League is no substitute, but will it have any effect?  One indication of how effective it could be presented itself last month when it was reported that the French foreign minister Bruno Le Maire complained about the negative effect, as he saw, of the new Hanseatic League’s opposition to some of the grander French notions for the EU.  The new League may be small, but it may turn out to be effective.

The dust kicked up by Brexit has obscured many things.  EU support for Irish concerns over Brexit doesn't solve underlying Irish problems with several of the ongoing EU Commission projects.  It's important to remember that despite Brexit, the “business as usual” of EU membership continues for the remaining 27 EU member countries, even though it doesn't feel very much like that at present. 

I'm writing this column today from Brussels, where judging from the various events and engagements I’ve been attending in the Parliament and elsewhere, it is apparent that UK influence is already in decline.  The British may be leaving on 29 March next, but we are staying, and staying with overwhelming public support for Ireland’s continued membership of the EU. 

That however doesn't mean that we won't have to continue to fight our corner with our European counterparts, and that will now have to be done without a former key ally.  We need to be making friends wherever we can, as we do by entering into new alliances with medieval names.  Whoever named Aer Lingus or Lufthansa had a keen sense of history.  So too it seems does this new Northern European League.

Brian Keegan is Director of Public Policy and Taxation with Chartered Accountants Ireland