As demand for professionals in accountancy and finance continues to heat up, salaries are on the rise and flexibility is top of the agenda for candidates, writes Arlene Harris. Despite rising inflation and predictions of impending recession, “good accountants will always be in demand” and, as companies shrug off pandemic restraints and begin to plan ahead once again, the need for professionals in all areas of finance is on the rise. So says Trayc Keevans, Global FDI Director at Morgan McKinley Ireland. “We are in a market like no other, rich with opportunity. It is one of the best times I can remember for accountancy professionals living and working in Ireland,” said Keevans.  Businesses emerging from under the cloud of COVID-19 are being “more intentional” in their hiring for accountancy and finance positions, according to Keevans. “I think this is why we are seeing so much demand in the market. In some instances, companies have been focusing their efforts mainly on surviving the pandemic by ensuring that the accounts were prepared and controls in place. They were really paying attention to very little beyond that,” she said. “Now, they are hiring again—some with a preference for finance professionals with data skills, because financial planning and analysis (FP&A) is seen as providing business intelligence that can help shape the way forward for companies.” The pandemic has also brought about a shift in the perspectives and preferences of candidates in the profession. “The pandemic really made for a much more competitive market, because employees had more time to evaluate their current positions, to think carefully about the level of flexibility they wanted in their working lives, and the direction they wanted their careers to take,” said Keevans. As recruitment moved online, the virtual hiring process also became faster and more agile. “All of these factors have combined to contribute to the record movement of professionals—particularly in the past 18 months,” Keevans said.  In response, she said companies had been adopting “all manner” of retention stratagems to keep talent on board. “Some of this focus has been on compensation and benefits. The culture of counter-offers is at an all-time high, and this has brought about the need for companies to be more agile in all things pay- and perk-related.” As a result, demand for payroll professionals is particularly high at the moment. “We have seen a number of companies that had previously outsourced to payroll bureaus opting to bring this function back in-house,” said Keevans. “This has created significant demand for payroll specialists, not just with EMEA and MNC experience, but also with experience in indigenous organisations.” In addition to compensation and benefits, employers are also responding to changing attitudes to work-life balance and remote working among candidates post-pandemic. “As long as the demand for accountancy talent outweighs supply, we will see professionals continuing to vote with their feet,” said Keevans. “Any company that isn’t offering any form of hybrid working can expect to see their talent pipeline reduced by up to 80 percent based on current market demands. “The preference in the market is for two to three days in the office and the remainder remote.” Some professionals are taking the demand for greater flexibility even further, challenging employers to adopt a more innovative approach to remote working policies. “We’re starting to see talent challenging the flexibility offered by their employer to include working from locations overseas for a number of weeks of the year,” said Keevans. “This trend is still in its infancy and employers are being understandably cautious in assessing the risks and fairness of such an approach before agreeing to any request.  “They are aware that doing so would need to be referenced within the company’s policy documents on the scope of the hybrid/remote working offering.” Employers are showing greater flexibility in other ways too – recruiting more candidates with experience in sectors other than those they operate in. “Until there is a levelling in demand and supply, we expect to see continued flexibility on the part of employers regarding the sectoral experience they are likely to be flexible on when hiring new recruits,” said Keevans. “As it stands, we have seen employers in all sectors showing flexibility in this regard, with the exception of manufacturing, construction and to some extent, pharmaceutical.” Starting salaries Starting salaries for newly qualified accountants are currently averaging €60,000, up from €55,000 this time last year, while part-qualified accountants can expect to earn about €45,000 annually. “The single biggest area of demand we’re seeing right now is for Big Four newly qualified accountants, as well as those with two to three years’ post-qualified experience in multinationals,” said Keevans. Demand for newly qualified accountants is high in both industry and financial services, as is demand for internal auditors and risk professionals, financial analysts, and accounts payable and receivable. Among tax professionals, the highest demand among employers is for candidates at managerial and senior managerial level. “Here, professionals with five years’ qualified experience are securing salaries of between €80,000 and €90,000 plus benefits. That’s up from a range of €70,000 to €75,000 up to 12 months ago,” said Keevans. “The growth in the number of FDI multinationals setting up here, and wishing to have an in-house tax function, is a driving factor—as are the retention incentives the bigger firms are putting in place to retain their tax talent.”   Keevans said there had been a significant shift from contract to permanent recruitment in the market, a trend she expects will continue in the 12 months ahead.   “As the market starts to open back up, we hope to see more mobility in terms of talent coming into the country,” she said. “This would be welcome as a means to alleviate some of the pressure on the supply of accountancy professionals, particularly in the transactional space. “It is important here for companies to consider the potential to sponsor talent to get employment permits and visas, where required, before going to market to hire. This will help to ensure as broad a talent pool as possible, accessible in the most efficient timelines.”

Chartered Star Fiona Smiddy was inspired to set up her sustainable business by a life-changing trip that gave her a new perspective on the world.  It was during a five-month career break in 2018, spent traveling from Colombia and Panama on to Australia and New Zealand, that Fiona Smiddy hit upon the idea for her own business—an eco-friendly venture that would help people shop more sustainably. “I remember I was on this hilltop in Medellín in Colombia, and I looked down and saw this little kid who was flying what looked like a kite. I realised as I was looking at him that it wasn’t a kite. It was a plastic shopping bag attached to a string,” said Smiddy. “I thought how lucky we are in Ireland with the economy we have, the opportunities and the climate. A lot of us can buy what we need. When you visit countries where people have so much less in so many ways, you realise just how much it matters to try to make a difference.” A Chartered Accountant, Cork-born Smiddy is the founder of Green Outlook, an ethical retailer selling eco-friendly skin, hair, and personal care products online at greenoutlook.ie. Smiddy runs the business from Rathangan, Co. Kildare, stocking products from close to 40 sustainable brands, including Daughters of Flowers, Janni Bars, Moo & Yoo, Oganicules and Sophie’s Soaps.  Each has been selected to help visitors to the site shop consciously. Many of the products are plastic-free, and all are made with natural ingredients and sustainably sourced, the majority in Ireland. “I set up the business after I came home after traveling. I took over a website that was already up-and-running. The founders were leaving Ireland and I wanted to get started as quickly as possible,” said Smiddy. “I did a whole rebrand, started my own social media channels and really worked on promotion and publicity, building awareness and bringing more brands on board.” Her work with Green Outlook has earned Smiddy the title of 2022 Chartered Star. Awarded in April by Chartered Accountants Ireland, the designation recognises outstanding work in support of the UN Sustainable Development Goals (SDGs).    As this year’s Chartered Star, Smiddy will now represent Ireland’s Chartered Accountancy profession at the One Young World summit in Manchester in September.  “My background in accountancy has been a huge help to me in getting my company off the ground. Once I knew that my future was going to be in sustainable business, I had this knowledge to hand right from the get-go, even down to simple things like filing VAT returns.  “I have been able to self-fund Green Outlook. I didn’t take anything out of the business for the first 18 months. I kept reinvesting and I think the financial knowledge I had really helped me to understand how important that was and get off to the right start.”  Recognising the important role Chartered Accountants can play in helping to combat the climate crisis, Chartered Star entrants must demonstrate how they are working towards, supporting, or living the values of any of the 17 UN SDGs.   Commenting on Smiddy’s win this year, Barry Dempsey, Chief Executive of Chartered Accountants Ireland, commended her “passion and commitment.” “As a profession and an Institute, we are fortunate and proud to be represented on the international stage by Fiona,” Dempsey said. “She follows in the footsteps of other Chartered Stars who have demonstrated passion and commitment in applying the skills and knowledge of the Chartered Accountancy profession to trying to address just some of the issues that the climate crisis presents.”  

As the recently appointed Vice-Chair of the International Sustainability Standards Board (ISSB), Sue Lloyd will play a key role in paving the way for a “global baseline” for reliable ESG investment criteria. Elaine O’Regan talks to the New Zealand-born former IASB Vice-Chair about what lies ahead in her new role.  Prior to taking up your role with the ISSB, you were Vice-Chair of the International Accounting Standards Board for six years. Looking back on it, what do you see as your most significant achievements in that role? Completing the international IFRS Standard for insurance contracts was definitely a high point, and also chairing the IFRS Interpretations Committee from 2017 to 2022, and making it more responsive. What does your appointment as Vice-Chair of the International Sustainability Standards Board mean to you professionally? How important do you think the work of the ISSB will be, and your role in it? I see this appointment as a really exciting opportunity for me professionally. Corporate reporting is at a real turning point where we are embracing the need for the broadest set of information about sustainability, risks and opportunities to help investors make informed decisions. I am really excited and honoured to be part of that process. The ISSB has a pivotal role to play in bringing more comparability and quality to reporting on sustainability risks around the world and building a more efficient system, both for the preparers, providing the information, and also for the investors consuming them. One of my key roles as Vice-Chair of the Board is to bring to bear the standard-setting approach of the IASB. My technical skills from that world, and my knowledge of financial reporting, will help me to bring that rigor to sustainability reporting for investors. How will the ISSB’s approach to standard-setting emulate or differ from that of the IASB? How will the two bodies coalesce and work together in the future? There will be a lot of similarity with the IASB, particularly in relation to due process and the thoroughness in which we approach our work. The ISSB wants to be really inclusive and build on the viewpoints of our stakeholders. We have that in common with the IASB. Obviously, the subject matter is different. Sustainability is a more nascent area of reporting, so we will have to work more closely with our ecosystem and really work with assurers and specialists in sustainability to build this new infrastructure for reporting. The ISSB is a sister board to the IASB, and that is great because it means we are part of the same foundation. It gives us the unique ability to sit together and work out the package of information we are asking for to meet investor needs, and to make sure that the reporting and the financial statements fit well together. When the IFRS talks about the ISSB establishing a “global baseline of sustainability standards” what does this mean, and why is it important for the ESG agenda globally? When we talk about a global baseline, what we really want to do is establish a set of disclosures that are sufficient to meet the needs of investors—to enable them to understand how sustainability, risks and opportunities affect the value of a company’s shares and its debt.  We want to provide a ‘set of information’ on companies around the world so that investors can make decisions based on consistent and comparable data. That is really what a global baseline means. It will happen in practice through a combination of two different mechanisms. One will be adoption or incorporation into the regulation in different countries, so that it becomes part of the mandatory reporting system for jurisdictions, in the same way that the IASB’s accounting standards have been mandated by jurisdictions around the world.  Complementing this, we expect there to be a lot of voluntary application of the standards, separate to the regulatory element, because this is a good way for preparers to understand what information is relevant to meet investor needs.   Tell us about the ISSB’s four core pillars – governance, strategy, risk management and metrics. How relevant is each one in the context of your overall mission? Our overall objective is to make sure that investors have the information they need to understand the effects of sustainability risks and opportunities on enterprise values, share price and the value of a company’s debt.  Our pillars are the prism we use to gather sustainability information from four different perspectives. One is how a company governs its risks, and how it is managing those risks and building them into its business strategy. We also look at the metrics they use to assess where they are now, to set their targets for the future and measure their progress in meeting their targets. This ‘package of information’ is designed to meet the investor’s needs, and, importantly, it is designed to encourage companies to think about how they govern and manage risks. How will the work of the ISSB support and help investors in respect of good environmental, social and governance (ESG) practice? What other ‘ESG stakeholders’ will benefit from your work? We know that there are different parties who are interested in information about sustainability, not just investors. We want to facilitate the provision of information to all of them. We want to make this an efficient reporting system for public policy purposes and for broader stakeholder groups beyond investors, for example. One of the aspects that we are focusing on here is what we call the “building block” approach.   This means that, when we are building our requirements, we have investors’ needs in mind, but we also want to make sure that others can add specific investor requirements onto our disclosures to meet broader needs. If we can avoid the need to have one set of disclosures for investors and a completely separate set for broader stakeholders, it is more efficient for those preparing the information. Tell us about the first draft ISSB standards, published in April. What do these draft standards provide for, how is the consultation process progressing and what will the next steps be? There are two documents. The first is the General Requirements Exposure Draft, which sets out the overarching requirements for what should be provided for in sustainability reporting.  It asks companies to provide information about all of their significant sustainability risks and opportunities relevant to enterprise value assessment.  It also sets out some other general ideas—for example, the fact that you should be able to understand how this information relates to the financial statements and the proposal that this information be provided at the same time as the financial statements. The second document is the Climate Exposure Draft, which sets out what specific disclosures should be provided by a company about climate risks and opportunity. This means that, if a company using the General Requirements Exposure Draft identifies climate risks and opportunities as a “significant” sustainability-related risk and opportunity, they can turn to the Climate Exposure Draft to find out what disclosures to provide.  That document is asking for information about the physical risks of climate change the company is exposed to—flood risk, for example—but also opportunities arising from climate change. If a company has developed a product, which may become more popular because of climate change, investors may want to hear about that as much as they would climate-related risk.  These drafts are out for comment until 29 July, 2022. Once we get the feedback, we will decide what we need to adjust, what we can keep as is, and then we will move on to the final requirements. How do you foresee the “roadmap” of additional draft standards rolling out beyond these first two? What standards are next on the agenda for consultation and what is the anticipated timeline for their introduction? Our next step will be to ask our stakeholders what they think we should prioritise after the General Requirements Exposure Draft and Climate Exposure Draft documents are approved.  We only have so much time, and the same is true for our stakeholders, so it is important to us to ascertain where the greatest needs lie. In other words, it is really up to the stakeholders to decide what we work on next. How will the International Sustainability Standards Board (ISSB) build on work already carried out by the Task Force on Climate-Related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB)? Our four core pillars (governance, strategy, risk management and metrics) are taken straight from TCFD recommendations, and they form the backbone of the proposals we have out for comment.  We have incorporated their structure and the climate disclosures included in the TCFD have been incorporated into our Climate Exposure Draft. We have built on SASB materials in two ways. Industry-based requirements in the appendix to the Climate Exposure Draft are taken from SASB’s industry-based standards.  We took the climate-related metrics and included those in the Climate Exposure Draft as part of the mandatory climate disclosures.  We are asking stakeholders to use SASB guidance to help them meet their disclosure requirements in the General Requirements Exposure Draft up until the time we draft more specific disclosure requirements of our own. How do you foresee the ISSB working alongside, and collaborating with, other standard-setting and regulatory bodies and initiatives like the Securities and Exchange Commission (SEC) the Global Reporting Initiative (GRI) and European Financial Reporting Advisory Group (EFRAG)? Having our proposals out for comment at the same time as the SEC and EFRAG proposals means that we have a unique opportunity to compare and contrast these different proposals and bring as much commonality as we can to our requirements. In an ideal world, we want to work together to build this global baseline and ensure as much consistency as possible with the SEC, EFRAG, the Global Reporting Initiative (GRI) and others.  We have a Working Group tasked with doing so with the US, Europe and also China, Japan and the UK. We are encouraging our stakeholders to write to the SEC and to let the commission know if they think that the global baseline is important.  The GRI is also very important and is a really good example of the ‘building block’ process that I described earlier.  We have a Memorandum of Understanding with GRI. One of our aims is to work together to form a global baseline we both agree on to meet investor needs and to encourage GRI to add the additional pieces of information to meet the broader information needs.

Julia Rowan answers your management, leadership, and team development questions. I try to be a good leader to my team – I coach, give feedback, help them develop new skills, etc. A few things have happened at company level (e.g. policy changes, unpopular decisions, team members not getting a promotion), and I feel I am getting the blame. As a result, there’s a lot of negative talk about the company, and the spark has gone out of the team. How do I get it back? Leaders often find themselves working very hard to defend, explain, and compensate for organisational issues over which they have no control. You have done a lot of good legwork here, and now you need to trust yourself. Lean into the discomfort, acknowledge the difficulty, offer support and put the ball back in your team members’ court.  For example, if somebody talks about “crazy promotion decisions” you might say, “I’m sorry you did not get that role. How can I help you be successful next time?”  Or, if someone talks about “stupid policies”, you might say something like, “It’s tough when these things don’t make sense. Is there something I can do to help?”   The critical thing here is to catch the moment of the criticism and change your response from explanation to acknowledgement. This is easy to write but hard to do, and you will kick yourself more than once as you realise you’ve launched into an explanation. One day you’ll stop doing it – and your team will feel heard. You might consider respectfully bringing the issue up with the team: “I feel that some organisational issues are impinging on our motivation. At our next meeting, should we talk about how we get our mojo back?” Listen to each person and ask the team how they want to move on. My guess is that the team will have arrived at that point themselves. I am pretty good at my job, but my manager micro-manages me. Nothing can be complete without her checking it. She makes irrelevant changes to my work, and even internal documents are drafted and redrafted. Apart from the frustration, it takes up huge time. How can I get her to back off? There are a lot of ways to answer this: we could look at your performance, the pressure your manager is under from their boss and your manager’s personality.  We could say that trying to change other people is generally a waste of time. The only person you can change is yourself, meaning you need to decide to live with, address or leave the situation.  Suppose you want to address the situation. Try to see beyond your manager’s behaviour and look at her intention: what is she trying to achieve? What hopes and fears lie beyond her behaviour? What does her behaviour tell you about what is important? Connect her behaviour with her intention and use it. For example, when she delegates work to you, explore what is important to her (accuracy, completeness, speed, etc.). Then let her know that you have heard her concerns and priorities. My read of this situation is that she is concerned about being (seen to be) good enough. You should ask yourself how you can usefully connect with and ease those concerns.  Julia Rowan is Principal Consultant at Performance Matters, a leadership and team development consultancy. To send a question to Julia, email julia@performancematters.ie.

SMEs hit hard by the pandemic must now grapple with the economic fall-out of the war in Ukraine, signalling fresh uncertainty for the year ahead, so what’s the best plan of action? COVID-19 lockdowns, global supply chain disruption, inflationary pressure – and now the economic fallout from the Russian invasion of Ukraine.  The headwinds facing Ireland’s small- and medium-sized enterprises (SMEs) show no signs of easing as we enter the third quarter of 2022. Even as the year began, the imminent winding down of Government supports for COVID-hit businesses was already prompting speculation of a spike in insolvencies just around the corner. Now, Gabriel Makhlouf, Governor of the Central Bank of Ireland, has called on a “patient” approach from policymakers and creditors to help ensure that “unnecessary liquidations of viable SMEs are avoided over the coming months.” Speaking at a recent event in Dublin co-hosted by the Central Bank of Ireland, Economic and Social Research Institute, and the European Investment Bank, Makhlouf pointed to the need to “channel distressed but viable businesses towards restructuring opportunities and unviable businesses towards liquidation.” Uncertain outlook For those SMEs in the sectors hit hardest by the pandemic, the fresh economic turmoil sparked by the Ukraine invasion will be a cause for concern. “The outlook right now for SMEs generally in Ireland is very hard to determine,” said Neil McDonnell, Chief Executive of the Irish SME Association (ISME). “It will vary considerably from sector to sector, but after two bad years for hospitality and tourism due to the pandemic, the war in Ukraine is likely to mean volumes will remain low into the summer.”  Pandemic-related insolvencies have yet to spike. Research released by PwC in February found that Government support had saved at least 4,500 Irish companies from going bust during the pandemic, representing an average of 50 companies per week during the period. Insolvency rates are likely to rise in the months ahead, however, as pandemic supports are withdrawn from businesses with significant debts, and PwC estimates that there is a debt overhang of at least €10 billion among Ireland’s SMEs, made up of warehoused revenue debt, loans in forbearance, supplier debt, landlords, rates and general utilities.  “Government supports have to end at some point. We realise this, but it will be accompanied by a significant uptick in insolvencies. This is natural and to be expected, since 2020 and 2021 both had lower levels of insolvency than 2019,” said Neil McDonnell. “Aside from hard macroeconomics, however, we can’t ignore the element of sentiment in how businesses will cope. This is the third year in a row of bad news.” Confidence in the market Before taking on his current role as Managing Partner of Grant Thornton Ireland, Michael McAteer led the firm’s advisory services offering, specialising insolvency and corporate recovery. “What I’ve learned is that you really cannot underestimate the importance of confidence in the market,” said McAteer. “If we go back to 2008 – the start of the last recession – or to 2000, when the Dotcom Bubble burst, we can see that, when confidence is lacking, the pendulum can swing very quickly. “If you’d asked me a few weeks ago, before the Ukraine invasion, what lay ahead for the Irish economy this year, I would have been much more optimistic than I am now. “Yes, we were going to see some companies struggling once COVID-19 supports were withdrawn, particularly those that hadn’t kept up with changes in the marketplace that occurred during the pandemic, such as the shift to online retail – but, overall, I would have been confident. Now, it is harder to judge.” Government supports Neil McDonnell welcomed the recent introduction of the Companies (Rescue Process for Small and Micro Companies) Act 2021, which provides for a new dedicated rescue process for small companies. Introduced last December by the Department of Enterprise, Trade and Employment, the legislation provides for a new simplified restructuring process for viable small companies in difficulty. The Small Company Administrative Rescue Process (SCARP) is a more cost-effective alternative to the existing restructuring and rescue mechanisms available to SMEs, who can initiate the process themselves without the need for Court approval. “We lobbied hard for the Small Company Administrative Rescue Process legislation. The key to keeping costs down is that it avoids the necessity for parties to ‘lawyer up’ at the start of the insolvency process,” said McDonnell. “Its efficacy now will be down to the extent to which creditors engage with it and, of course, it has yet to be tested in the courts. We hope creditors will engage positively with it.” McDonnell said further government measures would be needed to help distressed SMEs in the months ahead. “We already see that SMEs are risk-averse at least as far as demand for debt is concerned. Now is the time we should be looking at the tax system to incentivise small businesses,” he said.  “Our Capital Gains Tax (CGT) rate is ridiculously high, and is losing the Exchequer potential yield. Our marginal rate cut-off must be increased to offset wage increases.  “Other supports, such as the Key Employee Engagement Programme (KEEP) and the Research and Development (R&D) Tax Credit need substantial reform to make them usable for the SME sector.” Advice for SMEs For businesses facing into a challenging trading period in the months ahead, Michael McAteer advised a proactive approach. “The advice I give everyone is to try to avoid ‘being in’ the distressed part of the business. By that, I mean: don’t wait until everything goes wrong.  “Deal with what’s in front of you – the current set of circumstances and how it is impacting your business today.  “Ask yourself: what do I need to do to protect my business in this uncertain climate, and do I have a plan A, B and C, depending on how things might play out? “Once you have your playbook, you need to communicate it – and I really can’t overstate how important the communication is.  “Talk to your bank, your suppliers, creditors, and your employees. Sometimes, we can be poor at communicating with our stakeholders. We think that if we keep the head down and keep plugging away, it will be grand.  “By taking time to communicate your plans and telling your stakeholders ‘here’s what we intend to do if A, B or C happens,’ you will bring more confidence into those relationships and that can have a really positive impact on the outlook for your business. “Your bank, your creditors and suppliers are more likely to think: ‘These people know their business. They know what they’re doing.’ If something does go wrong, they know that there is already a plan in place to deal with it.” Role of accountants Accountants and financial advisors will have an important role to play in the months ahead as distressed SMEs seek advice on the best way forward. “We are about to experience levels of inflation we have not seen since the 1980s. This will force businesses to address their cost base and prices,” said Neil McDonnell. “My advice to SMEs would be: talk to your customers, to your bank, and your accountant. Your accountant is not just there for your annual returns. They are a source of business expertise, and businesses should be willing to pay for this professional advice. No business will experience an issue their accountant will not have not come across before.” As inflation rises, SMEs are also likely to see an increase in the number of employees seeking pay increases, McDonnell added. “Anticipate those conversations, if they haven’t occurred already,” he said. “Any conversation about wages is a good time to address efficiency and productivity – is there more your business could be doing to operate more efficiently, for example, thereby mitigating inbound cost increases?”

The war in Ukraine will profoundly impact the defensive stance of the EU’s neutral countries. Russian President Vladimir Putin’s decision to invade Ukraine is changing Europe in ways the Kremlin did not build into its calculations when it sought to conquer its western neighbour.  NATO, the EU and the United States are united in their agreement over an unprecedented, punitive package of sanctions against Russia.  Individual NATO members are sending lethal weapons to Ukraine. NATO, which has boosted its defences in Poland, the Baltic States and Romania, has ruled out a no-fly zone over Ukraine. It fears retaliation from Putin, even the threat of a nuclear strike. Meanwhile, Europe has opened its doors to refugees. No more squabbling over who to admit or how many numbers will flow into each country compared to 2015, when former German Chancellor Angela Merkel gave shelter to over one million Syrian refugees fleeing the war. Germany has thrown away its ‘rule book’. The belief that wandel durch handel (change through trade) would bring Russia closer to Europe is over.  Social Democrat Chancellor Olaf Scholz has reached a Zeitenwende — a turning point — not only regarding Russia, but domestically as well. German defence spending has risen to two percent of gross domestic product, equivalent to about €100 billion a year. The anti-American and pacifist wings in Scholz’s party are also toeing the new line — for now. As for the EU, its foreign policy chief, Josip Borrell, said the bloc would send weapons to Ukraine. What a turnaround for a soft power organisation built on a peace project. This may see the EU transition from a soft power provider to a hard power player as it now urgently reassesses its security and defence stance.  This is where the neutral countries of Ireland, Finland, Sweden, Austria and Malta face challenging debates and decisions. All have signed up to the EU’s Common Security and Defence Policy. With the exception of Denmark and Malta, they are participants in the EU’s Permanent Structured Cooperation (PESCO), aimed at increasing defence cooperation among the member states. They benefit from the decades-long US policy of guaranteeing the security umbrella for its NATO allies in Europe. Somehow, the neutral countries are having their cake and eating it too, but for how much longer? Russia’s attack on Ukraine changes everything about the future role of Europe’s security and defence policy. This was confirmed during the informal summit of EU leaders in Versailles in March. Europe has to take defence seriously.  Neutral Finland and Sweden already cooperate very closely with NATO. Russia’s invasion is leading to intense debates about whether both should now join the organisation.  As for Ireland? The war in Ukraine is linked to the security of all of Europe, forcing neutral countries to confront the reasons for their continued neutrality.  Maintaining neutrality at a time when Europe’s security architecture and the post-Cold War era is being threatened is no longer a luxury monopolised by pacifists, or those who link neutrality to sovereignty. It is about providing security to Europe’s citizens and how to do it collectively.  Taoiseach Micheál Martin has said discussions about military neutrality are for another day. Neutrality, he said, “is not in any shape or form hindering what needs to be done and what has to be done in respect of Ukraine”.  Neale Richmond, Fine Gael TD, has described the neutrality policy as “morally degenerate,” calling for a “long-overdue, serious and realistic conversation” about it.  Tánaiste Leo Varadkar has attempted to straddle both sides here. “This does require us to think about our security policy,” he has said. “I don’t see us applying to join NATO, but I do see us getting more involved in European defence.” Martin did later concede: “The order has been turned upside down by President Putin.” Neutral Ireland – and the rest of the EU – now must draw the consequences. Judy Dempsey is a Non-Resident Senior Fellow at Carnegie Europe and Editor-in-Chief of Strategic Europe.