Over the last decade, the small, vibrant country of Ireland has experienced a rocky turn of economic events. (bjmclaughlin/Flickr)
Over the last decade, the small, vibrant country of Ireland has experienced a rocky turn of economic events. Starting out the 21st century with unyielding strength, the country’s unemployment rate was at 4 percent and productivity was booming. It became appealing to European and American markets as a place to invest in, considering its repertoire of highly educated laborers, friendly business environment and low corporate tax rates.
As the years went on, Ireland’s revenues began to rely heavily on the property market, which became somewhat deceptive and unreliable. The government did not stop at increasing public spending, and banks continued to lend out more and more money until 2007 when it seemed more money had been given away than the country had been taking in. Unemployment abruptly rose for the first time since the 1990s.
The burst in the housing market bubble and extremely high unemployment rates caused investors to lose faith, and in 2009 the government debt was so high that Ireland was unable to borrow money to pay off the deficit. Celtic tiger was no more, and over the course of 2007 to 2009 the economy contracted 11.2 percent.
In late 2010, facing a magnanimous financial crisis, Ireland stipulated a deal with the International Monetary Fund and the E.U. to borrow over $80 billion for an adjustment program. The program includes banking and structural reforms as well as fiscal solidifications – all in an attempt to restore competitiveness in the Irish market and reorganize the approaches to economic policy. This ensured that Irish public services could continue running and helped save the unstable economy.
From this dark point in the financial history of Ireland has come a new epoch. Today, Ireland’s growth is back and slowly surging back to that of its tiger years. It still has a fairly long path to follow, but growth has returned and a high volume of exports has helped bolster the economy.
A large quantity of exports compensated for the lack of demand within the country, as America and Britain are constituent trade partners with Ireland. Domestic demand has also increased now that Irish citizens feel more confident as consumers. Renewed pocket confidence is now in part due to the fact that energy prices have declined throughout Europe.
Corporate tax rates in Ireland are low as 12.5 percent, and several successful companies have taken this blessing by launching European headquarters on the island. This fall, Apple began a capacious expansion on the outskirts of Cork, an industrial city in the south of Ireland. With Apple’s increasing development across the pond has come thousands more job opportunities.
Irish Prime Minister Enda Kenny confirms Ireland’s talents at bouncing back from the recession with his announcement, “This continued expansion by the company is a testament to the quality of the talent pool, the infrastructure and the business environment that this country has to offer and further cements Apple as one of the leading employers in Ireland.”
Housing prices are nowhere near where they were before the economic contraction, and construction continues to lag behind. In 2006, 90,000 houses were built in Ireland, and last year 11,000 were completed. So, although Ireland is doing relatively well compared to the last few years, its approach to economic policy has ample room for improvement.
Ireland’s government should carefully review new strategies to ensure that the same mistakes made years ago do not recur. Just before the recession began in 2007, the country was at an all-time high when suddenly the productive and wealthy economy flipped upside down. Public expenditures are still set to increase this winter by exactly €1.5 billion, and although it will not harm Ireland’s economy in the short run, if not eventually lowered, spending might one day outweigh revenue causing another downfall.
The remnants of the recession will exacerbate without significant change in the way spending is approached, very similar to the economic situation in the United States where for some reason we just cannot stop spending money we do not have.
Aly McTague is a staff columnist for The Daily Campus opinion section. She can be reached via email at alyvia.mctague@uconn.edu.