In Northern Ireland, peace driven by economics

Northern Ireland took a major step towards reconciling antagonistic Protestants and Catholics in devolved government Monday when two of the oldest adversaries involved in the province's 30-year "Troubles" finally met, talked, and agreed to share power in six weeks' time.

In a striking piece of political choreography, Ian Paisley and Gerry Adams, two lifelong opponents who disagree fundamentally on whether Northern Ireland should remain part of Britain, held face-to-face talks for the first time and agreed to work together in a government to begin May 8.

The deal, struck just hours before a deadline imposed by Britain was due to expire, will restore power-sharing for the first time in more than four years, only this time the key players will be the sectarian hard-liners who won elections earlier this month, not the moderates who previously held sway.

The most pressing challenges facing them will be economic rejuvenation, links with Ireland, and education issues, not to mention trying to ensure the government doesn't collapse amid mutual recrimination, as it did in 2002.

Seasoned commentators hailed Monday's deal as hugely symbolic, as well as auspicious, even if the tables had to be arranged so that Messrs. Paisley and Adams did not sit side by side, but rather across a corner from each other.

The pair have for decades represented two irreconcilable ideas. Paisley and his Democratic Unionist Party are vociferous proponents of tethering Northern Ireland and its Protestant majority to British rule. Adams, thought to have once been an IRA commander, is a longtime agitator for reunification with Ireland.

The idea of them sharing power was unthinkable as recently as two years ago. The spectacle of them meeting was as remarkable, if not as geopolitically significant, as the first handshake of Yitzhak Rabin and Yasser Arafat, or Ronald Reagan and Mikhail Gorbachev.

"Even though I expected a deal to be done, when you see something like that it's symbolic," says Henry Patterson, an expert in Northern Ireland's political process at the University of Ulster in Belfast, Northern Ireland. "Effectively, there is a government now. The fact that it won't function for six weeks is not that important," he says, adding that the parties will spend the coming weeks drawing up a program.

"The fact that Paisley and Adams are sitting down together, albeit at the corner of tables rather than side by side, is incredible, enormous," adds Michael Kerr, an expert in conflict resolution at the London School of Economics.

A number of factors lie behind the seismic political shift, analysts say. First, the republican movement recognized it could not win a violent struggle and so, over a number of years, disarmed, forswore violence, and decided to seek its aims through political means. Secondly, voters have repeatedly signaled that they want peace, and only a tiny fraction now vote for parties who reject the peace process.

Economic factors are also in play: Britain has dangled carrots and sticks in front of the parties. British treasury chief Gordon Brown offered an extra £1 billion ($1.97 billion) if a deal was struck; a failure to meet Monday's deadline would, however, have resulted in a punitive water-tax bill landing on doormats across the province.

As a result, sectarian enemies tend to see eye to eye on economic matters. Strikingly, one of the things that Paisley and Adams quickly agreed on Monday was the need to go back to Mr. Brown and seek a bigger financial package.

"Northern Ireland is massively dependent on the exchequer compared to the rest of the UK," notes Professor Patterson. "This has to change and that is the main challenge facing all the parties."

The obvious place to start looking is south of the border. The Irish government is contributing £400 million to help develop infrastructure around the border regions. A divided highway to Donegal in the northwest is to pass through Northern Ireland, offering regeneration prospects. A £7 million funding package has been advanced to expand Derry airport in Northern Ireland.

"Cross-border cooperation is crucial to the development of the northwest," says Niall Blaney, a member of the Irish parliament. "The investment in Derry City Airport, an electricity interconnection, and a proposed single electricity market are just some of the ways we are trying to work together in the interests of everyone on this island."

But one of the biggest impediments to inward investment in Northern Ireland is the high rate of corporate tax – 28 percent, which is uncompetitive compared with the 12.5 percent rate in Ireland. Brown is investigating the possibility of aligning the tax rates in Northern Ireland with those of the Republic.

"That won't happen," says Basil McCrea, a member of the Belfast Assembly, who claims that any taxation change would lead to demands from Scotland or Wales for similar preferential treatment. He adds that the incoming government will face critical economic questions, such as a ballooning 18- to 24-year-old population and the need for 180,000 new jobs in the next 10 years, at a time when manual employment is falling.

"We need to get the entrepreneurs generating jobs and wealth," says Mr. McCrea. "That's the key, and it comes from people rather than governments."