Harsh economic realities of post-Celtic Tiger years batter Ireland as much as but in different ways from other parts of Europe. The nostalgic, romanticised, When Irish Eyes Are Smiling (1912), is about Irish character surviving tribulation: ‘When Irish Eyes Are Smiling, sure ’tis like a morn in spring/In the lilt of Irish laughter you can hear the angels sing/When Irish hearts are happy all the world seems bright and gay/And When Irish Eyes Are Smiling, sure, they steal your heart away’.
The recession/slowdown of 2008-2009 was felt across the land. Finger-pointing and blame for collapse of housing market and banking, overheating, taxes, unemployment, the public sector and whether the Euro should have been joined, led to the 2010 EU bail-out.
3rd September 2011, the BBC reported the International Monetary Fund was releasing €1.5bn to the Republic as part of the rescue package, since Ireland had maintained ‘resolute implementation’ of its austerity programme of tax rises, spending cuts and economic restructuring. The economy showed ‘signs of stabilisation’.
Too Big to Cope?
While economies faltered and Eurozone crises continued, there was concern that Ireland could have to extend the €85bn bail-out or ask for another. In July 2011, interest was cut from about 6% to 3.5% – 4% with payback deferment doubled to fifteen years, as part of realignment/rescues of Greece and Portugal. In Ireland, up to 700m euros a year will not have to found.
An interesting perspective on how serious the bailout was, came from Americans. CNN reported (November 2010), Peter Morici of the University of Maryland: ‘it’ll keep the banks going, but not change objective conditions for average Irish people’.
They also quoted Allan Timmermann, Endowed Chair of Finance at University of California San Diego, who said that without the bailout, ‘cutbacks would have been more drastic’. Cutbacks are a hot political issue. Most commentators felt that a nation’s economy cannot be allowed to fail.
Runs on banks point to emergency help down the line, so better to do it in an orderly fashion. The problem was exacerbated and pushed into uncharted waters when the amounts were so large and countries needing help multiplied.
Ambrose Evans-Pritchard reported in the Daily Telegraph (August 2011), Germany’s Bundesbank had criticised EU bail-out policies, as the EU drifted towards a debt union without ‘democratic legitimacy’. Debt union without political union? That was another contentious issue.
Countries help each other from loans to buying debt. Even China accumulated €700bn of European debt as it sought less dependence on the US dollar. So, this is not a parochial matter for Eire alone.
More Doom and Gloom
Writing on Irish Central (May 2011), staff writer Cathal Dervan said that Irish financial woes were deteriorating, with €5bn likely to be needed by December rather than €3.5 billion, but premier Enda Kenny had ‘vowed not to cut public sector pay at any cost’.
Chief Economist with Friends First Life Assurance Company, Jim Power, had stated that growth forecast downgrades meant ‘an Irish default’ was likely. He demanded ‘realistic’ EU rescue because ‘the numbers are now too big for the economy to cope with, we’re running out of road’.
The dilemmas: how to implement cutbacks while investment and tax revenues decreased? How to reduce public sector staffing without tipping the jobless/benefits balance too far? How to carry people on reforms with the threat of more/deeper reductions?
The Government is striving to fulfill the Croke Park agreement to protect public pay and other measures, whilst achieving savings of around €3.6bn on a budget deficit of €12bn. Power maintained the economy cannot sustain further cuts (as high as €5bn), so default is inevitable. It’s what follows default which few are speculating aloud.
Reasons to Be Cheerful
Ronan Lyons, Irish economist, researcher, analyst across academic, public and private sectors based at Oxford University, felt as 2011 began that the Irish economy was more than government, banks and builders. There was a ‘social product’ encompassing community and voluntary sectors in the 2011 European Year of Volunteering.
He came up with 11 reasons to conclude the economy was not lost. The Irish Exchequer was in debt, but based on balance of payments, the non-governmental part of the economy was not. People were paying down personal debt, as in the UK.
Irish farmers had ‘a bumper 2010’, with EU figures showing income up almost 40%, from tillage (cereals and potatoes especially) to dairy. He felt that while Irish tourism had been hit badly in 2007-10, the 2011 UK Census, new Irish-North Carolina flights and excellent publicity in German and French travel publications would increase tourism income.
Optimistic Irish exporters defied ‘the greatest collapse in trade in recent history’ with figures rising through 2010. He took issue with economists like Jim Power who wanted an Ireland ‘that made things’, since usefulness of things to people is intangible. People pay for services as much as things, and services provided 46% of exports already.
Ireland had regained cost-competitiveness through falling office costs, surplus office space and downward pressure on wages. IDA Ireland (Industrial Development Agency) created over 11,000 jobs in 2010. Global ICT giants used Ireland as a base for Europe, the Middle East and Africa, and there were significant home-grown companies at the cutting edge of technological innovation.
Lyons also cited new jobs in life sciences (pharmaceuticals, biotechnology and medical devices) that generated local support jobs. He pointed to Irish education exports, worth €4 billion a year in students arriving to study and licensing education services overseas or delivering online.
Optimistic Realism?
He felt that Ireland’s entrepreneurs and their culture would attract foreign investment besides creating a hub where local business could emerge. There was criticism for not preparing for eurozone life, but ‘the Celtic Tiger was not a mirage’.
Finally, back to Irish eyes smiling and humour that brightens a bad day. Skibbereen in West Cork held the world’s first cloud festival, according to the Daily Telegraph (3 Sept 2011). To benefit their souls, delegates were urged to fight ‘blue sky thinking’ with ‘their heads in the clouds’.
Staged by The Cloud Appreciation Society with 27,000 members in 84 countries, it opened with ‘cloud spotting sessions’. Apparently only one was visible, a giant that dropped rain all day!
First published on Suite 101, 4 September 2011
Image: How Big Should A Euro Bail-Out Be? – Luis Javier Modino Martinez
