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E-mailIreland's economy... What economy?
Prestigious mag says nation's economy is shot
The party's over: See our slideshow
The Economist magazine has pronounced Ireland dead. The official diagnosis cites injuries sustained as the result of a collision with a runaway construction boom. But the results are still the same; the magazine reckons the country is dead.
The Irish Government is planning an emergency intervention on April 7, but most believe the surgery is too little and way too late.
The 10-year party’s over. The Irish economy is kaput. The only thing left to do is pick up the pieces.
The Economist points to the empty office buildings in Dublin as proof and claims that the only cranes moving are the ones over the new football stadium at Lansdowne Road.
In fact, Ireland is so quiet that the St Patrick’s Day festivities were low-key as the country adjusted to a recession which The Economist says is the worst in Europe.
The magazine highlights two key indicators; The economy shrank by 2.5 percent in 2008 and is expected to shrink another 6.5 percent this year.
Unemployment has jumped from 5 percent to 10.4 percent raising fears of the specter of the early 1980s when unemployment soared as high as 17 percent.
Meanwhile, the banks have been walloped by the collapse of the property market. They might have avoided the toxic securities which crashed the U.S. banking system but the overpriced construction loans could do them in.
The crisis is so bad that the Government is carrying out emergency surgery on April 7 with a rush Budget.
This rapid implosion in the Irish economy has focused attention on the insane housing boom. And let’s be honest, it looked psychotic from this side of the Atlantic.
But, the magazine claims that the housing collapse hides the fact that real gains were made in Ireland.
They divide the boom into two parts; one phase built the foundations; the other phase put so much stress on the system that it was doomed to fail.
Phase one
A youthful, English-speaking, cheap labor force ($14 an hour against $28 an hour in Germany in 1998) was a powerful magnet for direct foreign investment (DFI - think Dell and Xerox). The mostly U.S. companies poured in money and know-how and the Government gave the foreign companies, grants, a low tax rate and access to the EU market.
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