Ireland: What Went Wrong
From Wikipedia. An recent summary of Ireland's economic crisis.
Over the past decade, the Irish government has implemented a series of national economic programmes designed to curb inflation, ease tax burdens, reduce government spending as a percentage of GDP, increase labour force skills, and reward foreign investment. The Republic joined in launching the euro currency system in January 1999 along with eleven other European Union nations. The economy felt the impact of the global post-Dot Com economic slowdown in 2001, particularly in the high-tech export sector – the growth rate in that area was cut by nearly half. GDP growth continued to be relatively robust, with a rate of about 6% in 2001 and 2002 – but this was expected to fall to around 2% in 2003.
Since 2001, GNP growth has been much worse, with an almost threefold decrease in 2001 from the previous year. After a near stagnant year in 2002, growth started to pick up once again in 2003 [2]. By 2005, growth rates had increased to around 5%.
During 2007, Ireland's economic progress was however again affected by a wider global economic slow-down, with the construction sector being particularly affected. During the Summer of 2007, Irish residential property prices fell by over 2% and subsequently continued to fall by approximately 1% per month, leaving property prices down 9% by February 2008. This has impacted consumer spending and investment confidence across the Irish economy generally.
In July 2008, a predicted Eur 3bn shortfall in 2008 annual government revenues[2] led to the announcement of 440m reduction in Government spending[3]. In September, due to continuing revenue shortfalls, the 2009 budget was advanced six weeks to October 2008[4] and Government statistics showed that the Irish economy, with quarterly GDP falls of 0.3% and 0.5%, had entered recession at the start of 2008, for the first time since 1983[5], becoming the first of the Eurozone economies to officially do so during the global Economic crisis of 2008[6]. On budget day, Finance Minister Brian Lenihan said that the General Government deficit would be 7% of GDP in 2008, and would be kept to 6.5% (or E12bn) in 2009[7] in stark contrast to a Government surplus of E5.2bn in 2006[8].
Since 2001, GNP growth has been much worse, with an almost threefold decrease in 2001 from the previous year. After a near stagnant year in 2002, growth started to pick up once again in 2003 [2]. By 2005, growth rates had increased to around 5%.
During 2007, Ireland's economic progress was however again affected by a wider global economic slow-down, with the construction sector being particularly affected. During the Summer of 2007, Irish residential property prices fell by over 2% and subsequently continued to fall by approximately 1% per month, leaving property prices down 9% by February 2008. This has impacted consumer spending and investment confidence across the Irish economy generally.
In July 2008, a predicted Eur 3bn shortfall in 2008 annual government revenues[2] led to the announcement of 440m reduction in Government spending[3]. In September, due to continuing revenue shortfalls, the 2009 budget was advanced six weeks to October 2008[4] and Government statistics showed that the Irish economy, with quarterly GDP falls of 0.3% and 0.5%, had entered recession at the start of 2008, for the first time since 1983[5], becoming the first of the Eurozone economies to officially do so during the global Economic crisis of 2008[6]. On budget day, Finance Minister Brian Lenihan said that the General Government deficit would be 7% of GDP in 2008, and would be kept to 6.5% (or E12bn) in 2009[7] in stark contrast to a Government surplus of E5.2bn in 2006[8].
My Comment. Ireland's problems are the same as those hitting much of the rest of the Europe and the US. That is a problem rooted in the speculation of real estate brought about by very easy access to credit. Their problems are acerbated by an economy that is not as diverse as other parts of Europe and a very small population base. Ireland's major banks are in worse shape than ours and there has been talk that their economy could go the way of Iceland's. I think this is unlikely (although I am hardly an expert) but I think they are in for tougher economic slogging over the next five years than either us or much of the rest of Europe.
posted by CR English at 6:11 AM
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