SCENESETTER FOR SENATORS MCCAIN AND GRAHAM'S

UNCLAS SECTION 01 OF 02 DUBLIN 001721

SIPDIS

SENSITIVE

DEPT FOR H FOR RICHARD FONTAINE, ELLEN BRADY OF SENATORS'
MCCAIN/GRAHAM

E.O. 12958: N/A
TAGS: CASC CVIS EAIR ETRD MARR OREP PGOV PHUM PREL PTER EUN
SUBJECT: SCENESETTER FOR SENATORS MCCAIN AND GRAHAM'S
DECEMBER 1-3 VISIT TO IRELAND



1. (SBU) A background paper follows, describing key
political concerns. We would also note that the Northern
Ireland peace process is at a critical juncture, and the
final results of the process begun at Leeds Castle might be
announced during your visit.

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Political Background
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2. (SBU) Ironically, the party that has led Ireland through
most of the Celtic Tiger era, Fianna Fail, has seen a recent
erosion in its political support. In the June 2004 local and
European Parliament elections, Fianna Fail lost a number of
seats to opposition parties, led by Fine Gael and the upstart
Sinn Fein. Commentators attributed Fianna Fail's poor
showing to the electorate's sense that not all segments of
society have shared the benefits of the Celtic Tiger economy,
as reflected in growing crime rates and other social
problems. In a bid to re-energize the party and government
ahead of the 2007 general elections, Prime Minister
(Taoiseach) Bertie Ahern re-shuffled his cabinet in late
September. The move presages an effort by Fianna Fail to
recast its image as a party more attuned to social concerns.

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The Government Budget
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3. (SBU) Estimates for the 2005 government budget, released
on November 18, set forth Fianna Fail's economic priorities
in its bid to rebuild political support. Although a budget
deficit was originally forecast for 2004, increased revenues
tied to economic growth and one-off tax collections on
off-shore bank accounts will yield a year-end budget surplus
of 0.3 percent of GDP. Some ruling party members have
pressed new Finance Minister Brian Cowen to use this
unexpected windfall to address hot-button social issues,
including Ireland's dysfunctional health care system and
outdated transportation infrastructure. The Irish Central
Bank and most economists, however, have cautioned against
steep increases in government spending that could fuel
inflation, particularly with robust GDP growth predicted for

2005. In recent public comments, Minister Cowen has
indicated that the budget will offer tax relief for lower
income groups, but will avoid inflationary pressures that
could raise wage demands and erode Ireland's competitiveness.
On December 1, the national budget will be released,
providing specific details in regards to program funding.

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Ireland-Militarily Neutral
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4. (SBU) Ireland is militarily neutral, and does not have
troops in Iraq. Ireland continues, however, to allow the US
military to refuel at Shannon airport, and to support major
peacekeeping operations in areas such as KOSOVO, Afghanistan,
Lebanon, and Liberia, where Ireland is the largest
non-African contingency. (Under Irish law, troops cannot be
deployed without a "triple-lock": UN-authorized mission,
Government/Cabinet-level decision, and vote of Parliament).
The use of Shannon places great pressure on the government,
and elements of the public see this use as a violation of
neutrality. During the Reverend Jesse Jackson's recent trip,
the press quoted him as saying that the use of Shannon by US
military aircraft puts Ireland "in the line of fire" from
terrorist organizations. Parliamentarians raised this with
the Taoiseach on November 23. Parliamentarians regularly
question the government on the number of flights allowed and
on allegations that prisoners have traveled through Shannon
en route to Guantanamo. Shannon airport has not been used
to transit enemy combatants to or from the detention center
at Guantanamo, and it will not, without US consultations with
the Irish government. Also, on December 1, Irish courts will
pass sentence on a protester convicted of damaging a US
aircraft at Shannon.

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Northern Ireland Negotiations
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5. (SBU) Negotiations on a final settlement for Northern
Ireland continue to be a hot topic. Parties are reviewing a
joint proposal from the Irish and UK governments that would
restore Northern political institutions over the coming
months. This proposal builds upon progress that was achieved
in the September Leeds Castle talks, where Sinn Fein signaled
the IRA's willingness to cease paramilitary activity and
decommission weapons as part of a final deal. Northern
Ireland is the fastest growing region in the UK, and a
political settlement would help to accelerate growing
inter-Ireland trade and investment.
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Ireland and the War on Terror
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6. (SBU) The US embassy and Ireland enjoy a good working
relationship and information sharing in the ongoing war on
terror. On November 23, the Taoiseach announced that the
Irish national police are monitoring Al-Qaeda operatives in
Ireland and one Irish citizen has been designated as a
terrorism financier by the US authorities. Without UN
designation, currently there is little the Irish government
can do in terms of prosecuting suspects of terrorism
financing because legislation to criminalize international
terrorism has been hung up in the Irish Parliament for over
two years. Ireland is party to five of the twelve UN
Conventions Against Terrorism, but human rights and privacy
concerns have stalled movement on legislation to allow
Ireland to become party to the remaining seven. This
legislation is being discussed currently, and is expected to
pass before the year's end.

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Ireland -- A Confident EU Member State
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7. (SBU) Ireland's economic and diplomatic successes have
boosted the country's standing in the EU and have given Irish
citizens unprecedented national confidence. In less than a
generation, Ireland has grown from one of the poorest EU
Member States to one of the richest (in GDP per capita),
largely on the strength of government policies that espoused
open trade and investment, low corporate taxes, good labor
relations, low government debt, and prudent use of EU support
funds. Although the Celtic Tiger stumbled somewhat with the
post-9/11 global slowdown, a surge in housing construction
has Ireland on track to achieve roughly 5% annual GDP growth
in 2004, the highest in the EU. Moreover, Ireland won high
marks in Europe for its recent EU presidency, which saw the
accession of ten new EU member states, the successful
negotiation of the EU Constitutional Treaty, and the launch
of the U.S.-EU Trans-Atlantic Economic Partnership. These
accomplishments have contributed to Ireland's self-image as
an effective broker within the EU and a role model for new EU
Member States.

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Links with the U.S.
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8. (SBU) While Ireland is a player in the EU and continues
to benefit from EU markets and support funds, Irish leaders
attach equal importance to relations with the United States.
Beyond long-standing cultural ties, U.S. trade and investment
have been the twin engines of the Celtic Tiger economy.
There are roughly 570 U.S. firms operating in Ireland,
employing over 90,000 people and accounting for a third of
Ireland's annual exports. These firms include most major
biotechnology, IT, and financial services companies, which
use Ireland as a gateway to EU markets. Last year, new U.S.
investment in Ireland reached $9 billion, compared with $3.8
billion in China. The central role that U.S. businesses have
played in Ireland's economic transformation, however, is a
story not often told by the Irish media, which tend to take a
negative view of the United States, particularly our efforts
in Iraq.
KENNY