Northern Ireland Conflict and the Eurozone Monetary Theory

Posted on Feb 21, 2026 in Social sciences

History of Northern Ireland Conflict

The history of Northern Ireland is based on conflict between two main groups: Unionists/Loyalists (mainly Protestant, want to stay in the United Kingdom) and Nationalists/Republicans (mainly Catholic, want to join the Republic of Ireland). The conflict began many centuries ago.

Early Conflicts and Partition

  • 1601: The Battle of Kinsale occurred. Irish leaders Hugh O’Neill and Hugh Roe O’Donnell lost against England.
  • After this defeat, many Irish leaders left Ireland in an event called the Flight of the Earls.
  • 1607: The Ulster Plantation began. This created a new landowning class and made the native Irish Catholics second-class citizens. Gaelic culture started to disappear, and English control increased.
  • Irish people wanted Home Rule (self-government). The most important push was in 1912, but it was suspended.
  • 1920: The island was officially divided by the Government of Ireland Act.

Partition After Independence

After the War of Independence (1919–1921) and the Anglo-Irish Treaty (1921), Ireland was partitioned:

  • The Republic of Ireland was created in the south.
  • Northern Ireland remained part of the UK.

Modern Northern Ireland Dynamics

People see themselves as British, Irish, or Northern Irish, influencing politics and community relations. The region has its own local government, but is also controlled by the British Parliament. Northern Ireland is still more industrial than the Republic and depends heavily on UK financial support. Social and cultural divisions remain visible.

Civil Rights Movement (1967 – 1969)

This movement showed that conflict was also about fairness and equality. Many Catholic communities faced discrimination in housing, jobs, and political power. Inspired by the US, they organised peaceful marches. Violent reactions increased tensions and distrust. Important events:

  • Burntollet Bridge incident (1969)
  • Creation of the SDLP

The Troubles (1969 – 1998)

This was a long period of violence, with militarised streets, checkpoints, bomb scares, and gun attacks. Communities suffered deep trauma. A famous figure was Bobby Sands, an IRA prisoner who died on hunger strike.

Murals and Symbols

Murals became powerful political messages:

  • Republican murals: united Ireland
  • Loyalist murals: British identity, the Union. Many now promote peace and cooperation.

Peace Walls

These walls separate Catholic and Protestant areas, mainly in Belfast. Built in the 1960s–70s for safety, they became symbols of division and later peace hopes.

The Peace Process and Agreement

In the 1990s, John Hume and Gerry Adams held secret talks. Violence began to be replaced with dialogue, compromise, and negotiation. Key moments:

  • 1994 ceasefire (IRA & Loyalists)
  • 1996 collapse
  • 1997 ceasefire restored, leading to the 1998 agreement.

Good Friday Agreement (1998)

This agreement reshaped the political system, requiring power-sharing and recognising identity rights. Institutions include:

  1. Northern Ireland Assembly
  2. North–South Ministerial Council
  3. British–Irish cooperation.

Major Paramilitary Groups

  • Republican: Provisional IRA, Real IRA, INLA
  • Loyalist: UVF, UDA, UFF.

Recent Issues

Northern Ireland is peaceful but still divided. Identity, symbols (flags, murals, parades), and memory remain sensitive. Many seek justice for past events. Brexit revived fears of borders and instability. Changing demographics raise questions about Irish reunification.

Economic Monetary Union and the Euro

The euro was one of the biggest changes in the global monetary system. Before it, each European country used its own national currency, like the German mark or French franc. After its introduction, many countries started using one shared currency and one common monetary policy. This created the eurozone, which is a key example to understand how currency unions work, including their advantages and disadvantages.

Optimal Currency Area Theory

The euro is based on the theory of an Optimal Currency Area (OCA) developed by Robert Mundell. According to this theory, sharing a currency is efficient when regions are well-integrated. Countries that join a currency union lose control over interest rates and the exchange rate, so they cannot devalue the national currency to respond to an asymmetric shock. The only possible adjustment is internal devaluation (lowering wages and prices), a slow and painful process that often increases unemployment.

Mundell’s Four Criteria

  • Labour mobility: workers should be able to move easily to find jobs. In Europe this is limited by language and cultural differences.
  • Diversified economies: countries should not depend on a single sector, reducing the impact of shocks.
  • Free movement of goods, services, capital and flexible wages/prices: the single market supports this requirement.
  • Fiscal transfers: a strong central budget to help regions in crisis. The EU budget is small compared to the US, making this mechanism weaker.

EMU and the Introduction of the Euro

The euro belongs to the Economic and Monetary Union (EMU), which created the single market and a common monetary policy. The euro was introduced in 1999 for electronic transactions, and euro banknotes and coins arrived in 2002, replacing national currencies. Most EU countries adopted it, but some, like Denmark and Sweden, stayed outside.

Conversion Rates and Entry Effects

National currencies were converted into euros using fixed conversion rates. Choosing these rates was crucial:

  • If a country entered with an overvalued rate, its exports became expensive and competitiveness decreased.
  • If the entry rate was undervalued, exports increased and growth accelerated, but risks such as inflation and housing bubbles could appear.

Benefits of the Euro

The euro eliminated exchange costs and exchange rate risk, making trade easier and more predictable. Interest rates became lower and more stable, supporting investment. The euro also increased trade, competition and price transparency, and strengthened the EU’s global economic influence.

Costs and Risks

Countries lost their own monetary policy, since the ECB sets interest rates for the entire eurozone. Fiscal rules limit public spending, reducing flexibility during crises. The transition also required high implementation costs.

Public Opinion

Public opinion is generally positive, although support decreases during economic crises.