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AFTER MANY YEARS of extraordinary success the dramatic collapse of the Irish economy in 2008 was unprecedented in the history of post-war industrial countries. Who and what was responsible for the demise of the poster boy “Celtic Tiger”?
What lessons can be learned from the Irish debacle, and can the Tiger come roaring back?
1. Until around five years ago, the Irish economy was the envy of the world
During the ’90s, the rise of the Celtic Tiger was one of the most remarkable post-war industrial country phenomena. A relatively poor country on the periphery succeeded in transforming itself into one of the richest countries in Europe.
The key was the massive inflow of foreign direct investment, as US and other multinationals sought to take advantage of Ireland’s location and young, well-educated labour force – the only English-speaking country in the common currency euro area.
To be sure, sound financial and macroeconomic policies also helped inspire confidence. Ireland experienced annual growth rates of almost 10 per cent at times, living standards soared, and emigration — the hallmark of the Irish – turned into net immigration. Foreigners, especially from Eastern Europe, flocked to take advantage of the booming economy.
2. Things then started to go horribly wrong, although it was not recognised at the time
Starting around 2002, the technology based export led growth began to turn into a property bubble. Fuelled by special tax incentives and unlimited funding at low euro area interest rates, the Irish banks went on a splurge of reckless lending to property purchasers and developers. Government budget expenditures soared, financed by revenues from the artificially booming property sector.
House and land prices soared to levels among the highest in the world and the population engaged in a frenzy of borrowing to acquire property before it was too late…
3. The property bubble burst in a spectacular fashion in 2008
In 2008, following the bankruptcy of Lehman Brothers in the United States, the property bubble burst in a spectacular fashion. Almost overnight, prices began to plummet, eventually losing between 60-80 per cent of their value.
All the Irish banks became hopelessly insolvent, the budget deficit soared to almost unimaginable heights as the earlier surge in expenditures could not be reversed, and unemployment tripled. The fall in output was probably the largest ever experienced by an industrial country since the Second World War.
Ireland quickly found itself unable to borrow on international markets and in November 2010, had to follow Greece and seek ignominious recourse to an emergency bail out from the IMF and the EU.
4. Much progress has since been made but there is still a tough road ahead
Under the strict insistence of the IMF/EU, much — albeit painful — progress has been achieved in righting the financial ship of state in the last four years. The enormous budget deficit has been slowly but steadily reduced, and the massive financial problems of the banks have been addressed.
But Ireland’s debt has unavoidably continued to soar, and while the economic decline appears to have bottomed out, unemployment remains stubbornly high at around 14 per cent and large scale emigration has resumed.
Moreover, it is not clear that steps are being taken to tackle decisively the major failings in political and economic governance that caused the debacle in the first place
5. The future and Ireland’s corporate tax regime
It is very difficult to imagine a return to anything near the heady heights of the Celtic Tiger. Ireland’s economy is very heavily dependent on exports and the EU growth outlook remains very clouded.
Increasingly, there are questions as to whether Ireland’s preferential corporate tax regime – key to attracting foreign investment over the years — can be sustained in the face of pressures from other countries.
Still, even if real incomes in Ireland return to around their 2000 levels, this would still be an enormous improvement compared to the ’70s, when Ireland joined the EU as its then poorest member.
Dr. Donal Donovan is a Member of the Irish Fiscal Advisory Council, Adjunct Professor at the University of Limerick, and Visiting Lecturer at Trinity College Dublin. He is a former deputy director at the International Monetary Fund with considerable experience in the area of financial crises. He is co-author, with Antoin E. Murphy, of The Fall of the Celtic Tiger: Ireland and the Euro Debt Crisis.
This article originally appeared on the Oxford University Press blog.
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I listened to an American having a pint down my local last year rabbiting on about how good Team USA was at bringing democracy and freedom to I-rack and the rest of the world but when he heard about the proposed introduction of gay marriage here he nearly had a fit! Turns out that freedom only extends to people so long as they go by the Bible and that gay people shouldn’t be allowed to get married and be as miserable as straight people because God says so.
As the conversation went on it turned out that he loved the institution of marriage so much that he was on his third marriage! And he was a Creationist. Says it all.
How many did he have to drink? … quite a few I’d say to spout out that crap!
He started from the get go! First he wanted to know why weren’t our police armed, then why were our cars and roads so small. By the second Jameson we got the whole bringing peace and democracy “we woulda sorted out NI” in 6 months crap. So one of the lads lobbed in gay marriage and that’s when things got funny. He started quoting scripture and banging on about all sorts of shite. When he mentioned Sodom and Gommorah I jumped in seeing as I knew the story of it (and I had the Bible on my phone for just such an occasion) so he retreated fairly quickly.
When he told us that he was a Creationist we just gave up! What scares me though is that I think about 50% of Americans believe in this theology and at the same time control a huge part of the Government. Christian fundamentalists are as bad as Muslim fundamentalists.
Unfortunately, it was only afterwards that I remembered that I should have mentioned that we had a fantastic civil ceremony for a gay couple only the previous year in the same venue!
I am from boston & I travel a lot. These kind of yanks seem grossly over represented out in the world. It is tough hearing these FOX fans unloading their drivel, esp with the creationism, climate change denial & virulent racism, everywhere & always…..I guess if Frank here was, say your cousin , you might feel the shame….
How about we just call it Marriage Equality.
Some would call it marriage of sodomy
Lesbians wouldn’t
Frank, sodomy has a much wider definition than just what you think it is.
@ frank
there is nothing wrong with “sodomy” … without being too explicit, it is simply a different part of the body you put it into
Please expand big willy!
That’s what he said last night!
Frank, sometimes I think you are no different then the extremists in the Middle East that you rail against.
They are not for gay marriage either.
Declan Noonan_ Two things I want to make clear with you.
ISIS has DOUBLED in size since US intervention last August, no doubt this would have happened if the Iranian and Syrian Government were allowed fight them. It says everything about the ISIS agenda taking out the Syrian Government.
Secondly I am HIV+ so I have been there and done it.
Frank do you believe hiv causes aids? You seem to accept every other conspiracy theory.
Are you saying you’re a homosexual frank? (i’m assuming your ignorant enough to believe only gays get aids.)
Luke Duffy _ Yes i would be considered out among family, friends and GLBT circles, however from reading the Bible and accepting it as the word of God I would also accept the continuous practice of it as being sinful according to Romans 1 vs 26_27.
I also see it now in your face and shoved down your throat by western society. The turning point for me came about when radical GLBT groupes deliberatey started targeting Christian owned businesses and throwing them under the bus. I call it GLBT fascism and it will be something that will dramatically increase if this thing is passed in Ireland.
Praise Hope_ Since becoming HIV+ I have read up extensively on the subject and yes i do believe that there is something very sinister about HIV / AIDS. I accept it as a population control bio weapon developed to cull African nations. It is also a cash earner for big pharma producing antivirals. They would obviously lose out if a cure was developed.
The numbers alone speak for themselves.
A=1 B=2 C=3 D=4 E=5 F=6 G=7 H=8 I=9 J=10 K=11 L=12 M=13 N=14 O=15 P=16 Q=17 R=18 S=19 T=20 U=21 V=22 W=23 X=24 Y=25 Z=26
AIDS = 33, HIV = 39 (13+13+13), ARC = 22 (Aids related Complex)
Self hate is so unbecoming but it’s very leftwing and very out of date.
Frank, I’m surprised you don’t blame Obama for your hiv status? Or maybe Reagan?
Declan Noonan_There was only one person to blame and that is my self.
I was responsible for my own actions.
Irrespective of who developed it I could have avoided it.
Good,time we left medieval thinking behind.
Which is only right.
As a gay person, you are a first class citizen in the state you live in, then you go up the road to another state and you are back to being second class again
Great news!! Now I could be a millionaire in all 50 states, as according to the rare but bilious homophobic comments on this site, gay marriage is only being legalised in the US because the ‘pink’ dollar is worth millions. Anyone know if Bank of Ireland does the gay exchange rate on the dollar?
But then all straight marriages will become instantly meaningless and people will start marrying their pets, no?
Marriage will take on more worth as its a available to everyone. I think we are some way from people wanting to Mary their pets.
Yes Martin that’s what will happen + you’ll be able to marry your sister if you want and the sky will fall down.
Martin Byrne_That would only happen if Barack Obama allows it.
NO, it is simply widening out the availability of marriage to everyone and not restricting it to heterosexuals.
Marriage is a statement to the world that you want to stay with that person for the rest of you lives.
Why cant gay people have that same opportunity as well
My wife has seven cats to choose from. Three male and four female. Getting worried.
My wife has only one pussy!
Soon even trolls will be allowed to marry.
I may be flying a kite here, but it seems arguable that there’s an outside chance that Martin may possibly have been trying to be slightly sarcastic.
I am lookin forward to marrying my toaster.
I think (hope) Martin was just being sarcastic, as one of the arguments of the haters usually is, that with marriage equality people might want to marry a horse or donkeys and the suchlike
Good to see that everyone finally deserves the right to be miserable
Say what you want about the US but here they are leading the way again. In 10 years Cannabis may be legal in all 59 states clearing time for police to fight real crime.
All 59 states?
Good news about weed & the extra states, too! I hope the f they are warm.
Typo….
I think weed will be full legal in the formerly union states, long time away in Dixie. There are many methods for alleviating suffering and creating more just polities. Don’t expect to see them in states that tolerate infant mortality 2x and almost 3x Ireland’s then try and block national health. This is not an issue, like gay marriage, that will be settled in the Supreme Court. But when more than 50% of the us is full legal there will be huge pressure on other countries cowardly pols to match it or kill the young tourist buck. Money, not freedom, will settle this issue…sadly, I think. A reeferendum is the way to leave the boys drinking themselves into a stupor in the Dail bar off the hook for making a controversial decision. The Germans might not like it, though..
To play Devils Advocate.. It’s not really marriage equality as marriage will still be unavailable to cetain relationships.. Those who are related and those who wish to marry more than one person.. These People might also argue that they’re consenting adults who want their relationship recognised. If Marriage is extended to same sex couples what is the logic in restricting it in the above scenarios?
You know nothing Jon Snow
The same question was asked when state bans on interracial marriage was being overturned. But 60 or so years later, Americans still can’t marry their close relatives or groups of people. While we are talking about marriage, these are different circumstances and each case needs to be made on its own merits.
In Ireland, we’ve changed the rules around marriage a number of times, most recently with the divorce referendum. At the time of the referendum, there were already laws around separation, maintenance and support, access to children and so on. The ultimate outcome of the referendum was to allow people to remarry. To copy your question, if marriage is extended to people who were previously married, what is the logic in restricting it for other groups of people?
Brian.
Your reply is a bit of a misdirection. Let me paraphrase Jon Snows question:
If marriage is no longer about family ties and procreation but just two people living together for mutual support and pleasure how can it be denied to any other persons who want to live together in some pleasurable way, whether it be incestuous, paedophilic or bigamy.
Jim, people already marry for a wide range of reasons, including “just” for mutual support and pleasure. Allowing gay couples to marry doesn’t mean marriage is no longer about something, it just means that gay couples can marry.
To be fair Jim, I have not heard anyone calling for polygamy. Incest and pedophilia are illegal. Some countries I have looked at have gay marriage for over 10 years and none have polygamy, incest or people marrying children.
Fair play to ya Praise!
Im gonna marry my penis
Bet it will divorce you in 6 months!
That would be called marriage of Palm.
OMG, this is FABolous news, partay in the George tonight.
…bigots not invited
Uptight gay people with a chip on their shoulder also not invited.
I happened to be married …
to a woman!
So was Oscar Wilde..
Are the drinks on you? Am still a bit broke after Christmas :P
Michigan has banned gay marriage? So it’s not just confined to the red states, that’s disturbing.
I don’t know the place at all but Michelle Bachman, notorious loon, was 1 of their congress persons. Fairly diverse place as they also came through for Obama.
Yeah, sorry I really don’t know out there. She was from Minnesota…
Yeah, I was just about to say that. Minnesota is fairly red and Bachmann is a complete tool. Tea Party hack, I detest the like.
Michigan has been solid blue for ages on the national stage. It’s been blue every presidential election since 1988 and it has two Democratic senators. At the moment the Congressional delegation is majority red as is the governors mansion, most of this happened during the wave election. But overall, the state historically votes along Democrat lines. I was surprised to see they’re on the list.
And as the joke goes now they can be miserable like the rest of us. Sorry dear.
Im gonna marry my p*nis
Another loveless marriage!
You’ve said this twice. I’m starting to thing that there is no penis, and you need help. Be strong Niall.
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