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Friday, January 14, 2011

Ireland's Economic Meltdown

While I was away from the site the major story making the headlines here in Ireland was the effective implosion of the Irish economy. For those of you who weren't following the story Ireland became the first country to enter recession in the Eurozone in September 2008 and it is suspected to be the last to come out of it.

The crisis came about as a mixture of a number of factors. The housing market in Ireland was big business for a number of years, with prices rising rapidly and the construction sector employing an eight of the entire population. Owing to the global economic slowdown of late 2008 the property bubble in Ireland burst and by the middle of 2010 house prices had plummeted 35% compared with the second quarter of 2007. Therefore the construction sector was also mortally wounded creating waves of unemployment and mass emigration. The pressure greater unemployment put on Government funds added to the national debt already soaring.

The cost of doing business in Ireland has also caused a huge reduction in multi-national investment in the country particularly in Dublin where land prices were by far the highest. In order to lower this cost and help first-time buyers the Government began implementing a decentralisation policy in 2004. This however, has failed significantly to meet targets and fit the purpose for which it was enacted.

The Irish Banks were also deeply effected by the global downturn and the overly high evaluation of the Irish property market. They of course were not without blame having readily handed out 100% mortgages in the years preceding the crash and rumours of corruption were widespread, particuarly in the case of Anglo-Irish Bank, Irelands third largest bank which is now state-owned. The company reported a loss of €12.7 billion in March 2007, the largest figure in Irish corporate history. Last September the Government anounced the total cost of bailing out Anglo would be at least 29 billion euro.

On November 20 2010 the Irish Finance Minister stated that Ireland was not in danger of effective bankruptcy and that there was no worry of the need for IMF and EU intervention in providing money to the Irish economy. On November 21st the Taoiseach (Prime-Minister) announced that the irish Government had sought such assistance. In total the Irish economy will receive 85 billion euro, a decision welcomed by EU finance ministers and the European Central Bank.

While any of you who follow global economic trends will probably have a better idea of Ireland's economic solvency than I do perhaps something I can provide insight into is how this dreadful meltdown has effected the nation on a more human level.  Indeed reactions to the crisis have been exceptionally varied.

From many individuals within the Church who have seen a steady decline in influence over the population in recent years, the crisis, while certainly not welcomed has been viewed as a time in which we can reflect on the excesses and greed we are said to have indulged in during the Celtic Tiger years.  This reaction has been criticised from other impoverished groups in the nation claiming it ignores the reality of the stuggle of many ordinary citizens.

A devastating side effect of the crisis for many Irish families has been the exodus of the country by thousands of young people in figures which haven't been seen in the country since the last great economic recession in Ireland in the 1980s. Indeed Ireland has constantly suffered from a brain drain of its young workforce in its brief history. The problem was documented in an insigthful documentary by the national broadcaster last week titled Departure Days (viewing only available to Irish readers).

Irish Taoiseach (Prime Minister) -Brian Cowen

Another interesting outcome of the crisis is in many ways what could be seen as the political motivation of the Irish people. Ireland, to me has always been a nation of political apathy but this may all be about to change. I speak about this issue more extensively in an earlier post on the Irish political system . The ruling Fianna Fáil party which has been in power for the vast majority of the time since 1932 has seen public support decimated coming third place in opinion polls for the first time in its history. In response to this and revolt from coalition colleagues the Taoiseach has stated there will be a general election early this year. The crisi has led to a surge in protests and demonstrations against the Government from pensioner groups, Trade Unions and students.  Their also as is common in these situations, a marked increase in support for the left wing Sinn Féin party, often known for past affiliations with the IRA movement.

For me, one of the most startling revelations to come out of the trouble is that of a realisation of the depth of Irish patriotism. When the IMF bailout was announced a wave of anger swept the nation. The people were anxious as to the role the IMF and EU would play in future economic policy decisions. When it was announced that Britain would be giving us eight billion euro people the length and breadth of the country could be heard and seen in various forms of media decrying the loss of economic sovereigity to our old colonial oppressors. The names of various "heroes" in the struggle for independence were touted as turning in their graves at th actions of the Government.

Despite all of this the country still carries on. Times are indeed tough for a growing number of people and it appears the road to recovery will only end after some considerably harsh budgets are pushed through first. However, personally I have seen many examples of camaradery in the midst of the gloom and I have no doubt that this nation will find its fight, the interesting question is how fast the next Government can get us there.

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