Celtic Tiger
Encyclopedia
Celtic Tiger is a term used to describe the economy of Ireland
during a period of rapid economic growth
between 1995 and 2007. The expansion underwent a dramatic reversal
from 2008, with GDP contracting by 14% and unemployment levels rising to 14% by 2010. Moody's
proceeded to downgrade Ireland's government bond ratings to junk in mid-2011.
report by Kevin Gardiner. The term refers to Ireland's similarity to the East Asian Tigers
; South Korea
, Singapore
, Hong Kong
, and Taiwan
during their periods of rapid growth in the late 1980s and early 1990s. The Celtic Tiger period has also been called "The Boom" or "Ireland's Economic Miracle".
During that time, Ireland experienced a boom
in which it was transformed from one of Europe's poorer countries into one of its wealthiest. The causes of Ireland's growth are the subject of some debate, but credit has been primarily given to state-driven economic development: social partnership between employers, government and unions, increased participation in the labour force of women, decades of investment in domestic higher education; targeting of foreign direct investment; a low corporation tax rate; an English-speaking workforce, and crucial EU membership – which provided transfer payments and export access to the Single Market.
By mid-2007 in the wake of the growing global financial crisis the Tiger had all but died. Some critics, such as David McWilliams
who had been warning about impending collapse for some time concluded that:
The case is clear: an economically challenged government, perniciously influenced by the interests of the housing lobby, blew it. The entire Irish episode will be studied internationally in years to come as an example of how not to do things.
Historian Richard Aldous considers that the Celtic Tiger has now gone the way of the dodo . In early 2008 many commentators thought a soft landing was likely. By January 2009, it seemed possible the country could experience a depression
. In early January 2009, the Irish Times in an editorial declared that:
We have gone from the Celtic Tiger to an era of financial fear with the suddenness of a Titanic-style shipwreck, thrown from comfort, even luxury, into a cold sea of uncertainty.
In February 2010, a report by Davy Research concluded that Ireland had "largely wasted” its years of high income during the boom, with private enterprise investing its wealth "in the wrong places", comparing Ireland's growth to other small Euro zone countries such as Finland
and Belgium
- noting that the physical wealth of those countries exceeds that of Ireland, because of their "vastly superior" transport infrastructure, telecommunications network and public services.
The aspiration to become a Celtic Tiger has also been expressed by leaders of the other Celtic countries. Addressing the Council on Foreign Relations
in New York
in October 2007, Alex Salmond
, the SNP
First Minister
of Scotland
, said "we have everything it takes for a Celtic Lion economy to take off in Scotland" (the lion rampant
is the heraldic symbol of Scotland).
The onset of the Irish economic crisis and bank bailout prompted Scottish Labour Party leader Iain Gray
to ridicule Salmond's aspiration, telling the Scottish Parliament in 2010 that "Scotland’s banking sector is ten times the size of Ireland’s. The Royal Bank of Scotland alone had a balance sheet 15 times the size of the Scottish economy. Alex Salmond just does not get it. Everyone in Scotland knows that in a separate Scotland our two biggest banks would have gone and with them all the jobs, all the savings, all the pensions, all the mortgages and all the salaries."
. Although the GDP does not represent the standard of living
, and the GNP remained lower than the GDP, in 2007 the GNP achieved the same level as of some other Western European countries.
ation rate (10 to 12.5 percent throughout the late 1990s), and to net transfer payment
s from members of the European Union
like Germany
and France
that were as high as 4% of gross national product. Since 1956, successive Irish governments have pursued low taxation policies.
and physically helping infrastructure
. The increased productive capacity of the Irish economy is sometimes attributed to these investments, which made Ireland more attractive to high-tech businesses, though the libertarian Cato Institute
has suggested that the EU transfer payments were economically inefficient and may have actually slowed growth. The conservative Heritage Foundation
also attributed transfer payments with no significant role in causing growth. Ireland's membership in the European Union since 1973 helped the country gain access to Europe's large markets. Ireland's trade had previously been predominantly with the United Kingdom
.
) encouraged high-profile companies like Dell
, Intel, and Microsoft
to locate in Ireland. These companies were attracted to Ireland because of its European Union membership, relatively low wage
s, government grants
and low tax rates. Enterprise Ireland, a state agency, provides financial, technical and social support to start-up businesses.
The building of the International Financial Services Centre
in Dublin led to the creation of 14,000 high-value jobs in the accounting, legal and financial management sectors.
In July 2003 the government established the Science Foundation Ireland
on a statutory basis to promote education for highly-skilled careers, particularly in biotechnology and information&communications technology, with the additional purpose to invest in science initiatives that aim to further Ireland's knowledge economy
.
difference allows Irish and British employees to work the first part of each day while U.S. workers sleep. U.S. firms were drawn to Ireland by cheap wage costs compared to the UK, and by the limited government intervention in business compared to other EU members, and particularly to countries in Eastern Europe. Growing stability in Northern Ireland
brought about by the Good Friday Agreement further established Ireland's ability to provide a stable business environment.
Irish workers can communicate effectively with Americans — especially compared to other low-wage EU nations such as Portugal
and Spain
. This factor was vital to U.S. companies choosing Ireland for their European headquarters. It has also been argued that the demographic dividend
from the rising ratio of workers to dependents due to falling fertility, and increased female labour market participation, increased income per capita.
soared to record levels, enabling a huge rise in consumer spending. Unemployment
fell from 18% in the late 1980s to 4.5% by the end of 2007, and average industrial wages grew at one of the highest rates in Europe. Inflation
brushed 5% per annum towards the end of the 'Tiger' period, pushing Irish prices up to those of Nordic Europe, even though wage rates are roughly the same as in the UK. The National debt has remained constant during the boom, but the GDP to Debt ratio has dropped, due to the dramatic rise in GDP. ".
The new wealth resulted in large investments in modernising Irish infrastructure and cities. The National Development Plan
led to improvements in roads, and new transport services were developed, such as the Luas
light rail lines, the Dublin Port Tunnel
, and the extension of the Cork Suburban Rail
. Local authorities enhanced city streets, and built monuments like the Spire of Dublin
.
Ireland's trend of net emigration was reversed as the republic became a destination for immigrants. This significantly changed Irish demographics and resulted in expanding multiculturalism
, particularly in the Dublin, Cork
, Limerick
and Galway
areas. It was estimated in 2007 that 10% of Irish residents were foreign-born. Most of the new arrivals were citizens of Poland and the Baltic states, many of whom found work in the retail and service sectors. Within Ireland, many young people left the rural countryside to live and work in urban centres. The growing success of Ireland's economy encouraged entrepreneurship
and risk-taking, qualities that had been dormant during poor economic periods. However, whilst some semblance of a culture of entrepreneurship exists, foreign-owned companies account for 93% of Ireland's exports.
Many people in Ireland believe that growing consumerism during the boom years eroded the country's culture
, with the adoption of American capitalist
ideals. While Ireland's historical economic ties to the United Kingdom had often been the subject of criticism, Peader Kirby argues that the new ties to the U.S. economy were met with a "satisfied silence." Nevertheless, voices on the left have decried the "closer to Boston than Berlin" philosophy of the government parties. Writers such as William Wall
, Mike McCormick and Gerry Murphy
have satirised these developments.
Similarly, many Irish people maintain what they consider a pragmatic approach to immigration, saying that it is necessary to bring about further GDP growth and that Ireland, as a nation with a long history of emigration, has an obligation to accept immigrants.
Growing wealth was blamed for rising crime levels among youths, particularly alcohol-related violence resulting from increased spending power. However it was also accompanied by rapidly increased life expectancy and very high quality of life ratings (indeed, the country ranked first in The Economist's quality of life index).
Despite its mandate for stricter oversight, the agency never imposed major sanctions on any Irish institution, even though Ireland had experienced several major banking scandals in overcharging of their customers. Industry representatives disputed the idea that Ireland may be home to unchecked financial frauds. In December 2008, irregularities in directors loans, that were kept off a bank's balance sheet for eight years forced the resignation of the financial regulator.
Economic commentator David McWilliams
has described the collapse of Anglo Irish Bank as Ireland's Enron
.
The economy was impacted by a large reduction in investment in the worldwide information technology
(IT) industry. The industry had over-expanded in the late 1990s, and its stock market equity declined sharply. Ireland was a major player in the IT industry: In 2002, it had exported US$10.4 billion worth of computer services, compared to $6.9 billion from the United States. Ireland accounted for approximately 50 percent of all mass-market packaged software sold in Europe in 2002 (OECD, 2002; OECD, 2004).
Foot and mouth disease and the September 11, 2001 attacks
damaged Ireland's tourism and agricultural sectors, deterring U.S. and British tourists. Several companies moved operations to Eastern Europe
and the People's Republic of China
because of a rise in Irish wage costs, insurance premiums, and a general reduction in Ireland's economic competitiveness. The rising value of the Euro
hit non-EMU
exports, particularly those to the U.S. and the United Kingdom.
At the same time, economies globally experienced a slowdown. The economy of the United States grew only 0.3% in April, May and June 2002 from a year earlier. The Federal Reserve made 11 rate cuts that year in an attempt to stimulate the U.S. economy. In Europe, the EU scarcely grew throughout the whole of 2002, and many governments (notably Germany and France) lost control of public finance
s, causing large deficits that broke the terms of the EMU Stability and Growth Pact
.
The economic downturn in Ireland was not a recession
but a slowdown in the rate of economic expansion. Signs of a recovery became evident in late 2003 as U.S. investment levels increased once again. Many senior economists have heavily criticised the Government and the economic imbalance in favour of the construction industry and the prospect of sustaining economic growth in the future.
After the slowdown in 2001 and 2002, Irish economic growth began to accelerate again in late 2003 and 2004. Some of the media considered that an opportunity to document the return of the Celtic Tiger — occasionally referred to in the press as the "Celtic Tiger 2" and "Celtic Tiger Mark 2". In 2004, Irish growth was the highest, at 4.5%, of the EU-15 states, and a similar figure was forecast for 2005. Those rates contrast with growth rates of 1% to 3% for many other European economies, including Germany, France, and Italy
.
In 2006 there was a surge in Foreign Direct Investment and a net increase of 3,795 in IDA supported jobs with International and Financial Services having the highest growth rate.
The reasons for the continuation of the Irish economic boom were somewhat controversial within Ireland. Skeptics said that the recent growth was merely due to a great increase in property values
, and to catch-up growth in employment in the construction sector.
Globally, the U.S. recovery boosted Ireland's economy due to Ireland's close economic ties to the U.S. The decline in tourism as a result of foot and mouth disease and the September 11, 2001 attacks
had reversed itself. The recovery of the global information technology industry was also a factor: Ireland produced 25% of all European PCs
, and Dell
, IBM
, Apple
and HP
all had sizeable Irish operations, with Dell
having its major European manufacturing plant in Limerick
.
There has been a renewed investment by multi-national firms. Intel had resumed its Irish expansion, Google
created an office in Dublin, Abbott Laboratories
was building a new Irish facility and Bell Labs
were to open a future facility.
Domestically, a new state body, Science Foundation Ireland
, was established to promote new science companies in Ireland Maturing funds from the SSIA government savings scheme relaxed consumers' concerns about spending and thus fuelled retail sales growth.
In September 2009, Tánaiste
Mary Coughlan, said Ireland had lost ground in international competitiveness every year since 2000.
, warned of excessive Irish property values
. 2004 saw the construction of 80,000 new homes, compared to the United Kingdom's 160,000 – a nation that has 15 times Ireland's population. It is estimated that home completions in 2006 may have reached 90,000.
In January 2009 UCD
economist Morgan Kelly predicted that house prices would fall by 80 per cent from peak to trough in real terms.
in 2008 gaining several hundred former Irish jobs from the accountancy division of Philips
and Dell
.
, CRH
, Kerry Group
, Smurfit Kappa Group
, Élan
and Ryanair
, there are few companies with over one billion euro
s in annual revenue. The government has charged Enterprise Ireland with the task of boosting Ireland's indigenous industry. The government launched a Web site in 2003 with the objective of streamlining and marketing the process of starting a business in Ireland.
bogs, building various hydroelectric projects including a dam at Ardnacrusha
on the River Shannon
in 1928, and developing offshore
gas fields and diversifying into coal in the 1970s. Gas, peat and hydroelectric power have been almost fully exploited in Ireland. This situation has led to a continuously increasing need for fossil fuels at a time of increasing concerns about security of supply
and global warming
. One solution is to develop alternative energy sources including wind power
and, to a lesser extent, wave power
. Wind however is not a panacea as it needs to have conventional plants to augment it. An offshore wind farm
is currently under construction off the east coast near Arklow
, and many remote locations in the west show potential for wind farm development. A report by Sustainable Energy Ireland indicated that if wind power were properly developed, Ireland could one day be exporting excess wind power if the natural difficulties of integrating wind power into the national grid are solved. Wind power by November 2009 already accounted for 15.4% of total installed generating capacity in the state. By 2020 the Irish government forecasts that 40% of the countries energy needs will come from renewable sources, well above the EU average.
. He cites Eurostat
figures which indicate that Ireland is just above average in terms equality by one type of measurement. However, while it is better off by this measurement than generally less developed and/or more free market countries like Britain, the Mediterranean and the new accession states, Ireland is still more unequal than the Scandinavan countries, Germany and France.
Moreover, Ireland's inequality persists by other measurements. According to an ESRI report published in December 2006 is the 22nd best out of the 26 richest countries in terms of the level of its child poverty; and the 2nd most unequal country in Europe.
(ESRI) on June 24, 2008 forecast that there was a possibility the Irish economy would experience marginal negative growth in 2008. This would be the first time since 1983. Outlining possible prospects for the economy for 2008, the ESRI said output of goods and services may fall that year—which would be the Irish definition of a mild recession. It also predicted a recovery in 2009 and 2010.
In September 2008, Ireland became the first eurozone country to officially enter recession
.
The recession was confirmed by figures from the Central Statistics Office showing the bursting of the property bubble and a collapse in consumer spending terminated the boom that was the Celtic Tiger.
The figures show the gross domestic product
(GDP), which measures the value of all the goods and services produced in the State, fell 0.8% in the second three months of 2008 compared with the same quarter of 2007. That was the second successive quarter of negative economic growth, which is the definition of a recession.
This is the first time since 1983, that the economy has been hit by falling growth, or recession.
In a November 2008 interview in Hot Press
in a grim assessment of where Ireland stood, Taoiseach
Brian Cowen
said that many people still did not realise how badly shaken the public finances were.
By 30 January 2009, Ireland’s government debt had become the riskiest in the euro zone, surpassing Greece’s sovereign bonds, according to credit-default swap prices.
In February 2009, Taoiseach
Brian Cowen
said that Ireland's economy appeared on course to contract by 6.5 percent in 2009.
Garret FitzGerald
has blamed Ireland's dire economic state in 2009 on a series of "calamitous" government policy errors.
Between the years of 2000 and 2003 the then Finance Minister Charlie McCreevy
boosted public spending by 48% while cutting income tax.
A second problem occurred when government policies allowed, or even encouraged, a housing bubble to develop, "on an immense scale".
Nobel laureate Paul Krugman
had a bleak prediction,
“As far as responding to the recession goes, Ireland appears to be really, truly without options, other than to hope for an export-led recovery, if and when the rest of the world bounces back.”
The International Monetary Fund
in mid April 2009 forecasted a very poor outlook for Ireland. It projected that the Irish economy would contract by 8 per cent in 2009 and by 3 per cent in 2010 – and that might be on the optimistic side.
Unemployment in Ireland is forecasted to rise almost 17 per cent in 2010, the Economic and Social Research Institute
(ESRI) stated in a report published on 2009-04-28
, however the unemployment rate in 2010 steadied at a rate of 14%.On November 19, 2010, The Irish Government had begun talks on a multi-billion-dollar economic bail-out package with experts from the International Monetary Fund (IMF) and the European Union.
Republic of Ireland
Ireland , described as the Republic of Ireland , is a sovereign state in Europe occupying approximately five-sixths of the island of the same name. Its capital is Dublin. Ireland, which had a population of 4.58 million in 2011, is a constitutional republic governed as a parliamentary democracy,...
during a period of rapid economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
between 1995 and 2007. The expansion underwent a dramatic reversal
2008–2011 Irish financial crisis
The 2008–2011 Irish financial crisis, which had stemmed from the financial crisis of 2008, is a major political and economic crisis in Ireland that is partly responsible for the country falling into recession for the first time since the 1980s...
from 2008, with GDP contracting by 14% and unemployment levels rising to 14% by 2010. Moody's
Moody's
Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...
proceeded to downgrade Ireland's government bond ratings to junk in mid-2011.
Term
The colloquial term Celtic Tiger has been used to refer to the country itself, and to the years associated with the boom. The first recorded use of the phrase is in a 1994 Morgan StanleyMorgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
report by Kevin Gardiner. The term refers to Ireland's similarity to the East Asian Tigers
East Asian Tigers
The Four Asian Tigers or Asian Dragons is a term used in reference to the highly developed economies of Hong Kong, Singapore, South Korea and Taiwan. These nations and areas were notable for maintaining exceptionally high growth rates and rapid industrialization between the early 1960s and 1990s...
; South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
, Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
, Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
, and Taiwan
Taiwan
Taiwan , also known, especially in the past, as Formosa , is the largest island of the same-named island group of East Asia in the western Pacific Ocean and located off the southeastern coast of mainland China. The island forms over 99% of the current territory of the Republic of China following...
during their periods of rapid growth in the late 1980s and early 1990s. The Celtic Tiger period has also been called "The Boom" or "Ireland's Economic Miracle".
During that time, Ireland experienced a boom
Boom and bust
A credit boom-bust cycle is an episode characterized by a sustained increase in several economics indicators followed by a sharp and rapid contraction. Commonly the boom is driven by a rapid expansion of credit to the private sector accompanied with rising prices of commodities and stock market index...
in which it was transformed from one of Europe's poorer countries into one of its wealthiest. The causes of Ireland's growth are the subject of some debate, but credit has been primarily given to state-driven economic development: social partnership between employers, government and unions, increased participation in the labour force of women, decades of investment in domestic higher education; targeting of foreign direct investment; a low corporation tax rate; an English-speaking workforce, and crucial EU membership – which provided transfer payments and export access to the Single Market.
By mid-2007 in the wake of the growing global financial crisis the Tiger had all but died. Some critics, such as David McWilliams
David McWilliams
David McWilliams is an Irish journalist and economist. McWilliams has worked with as an economist with Central Bank of Ireland and as a banker with UBS bank and the Banque Nationale de Paris...
who had been warning about impending collapse for some time concluded that:
The case is clear: an economically challenged government, perniciously influenced by the interests of the housing lobby, blew it. The entire Irish episode will be studied internationally in years to come as an example of how not to do things.
Historian Richard Aldous considers that the Celtic Tiger has now gone the way of the dodo . In early 2008 many commentators thought a soft landing was likely. By January 2009, it seemed possible the country could experience a depression
Depression (economics)
In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen by some economists as part of the modern business cycle....
. In early January 2009, the Irish Times in an editorial declared that:
We have gone from the Celtic Tiger to an era of financial fear with the suddenness of a Titanic-style shipwreck, thrown from comfort, even luxury, into a cold sea of uncertainty.
In February 2010, a report by Davy Research concluded that Ireland had "largely wasted” its years of high income during the boom, with private enterprise investing its wealth "in the wrong places", comparing Ireland's growth to other small Euro zone countries such as Finland
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
and Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
- noting that the physical wealth of those countries exceeds that of Ireland, because of their "vastly superior" transport infrastructure, telecommunications network and public services.
The aspiration to become a Celtic Tiger has also been expressed by leaders of the other Celtic countries. Addressing the Council on Foreign Relations
Council on Foreign Relations
The Council on Foreign Relations is an American nonprofit nonpartisan membership organization, publisher, and think tank specializing in U.S. foreign policy and international affairs...
in New York
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
in October 2007, Alex Salmond
Alex Salmond
Alexander Elliot Anderson "Alex" Salmond MSP is a Scottish politician and current First Minister of Scotland. He became Scotland's fourth First Minister in May 2007. He is the Leader of the Scottish National Party , having served as Member of the Scottish Parliament for Gordon...
, the SNP
Scottish National Party
The Scottish National Party is a social-democratic political party in Scotland which campaigns for Scottish independence from the United Kingdom....
First Minister
First Minister of Scotland
The First Minister of Scotland is the political leader of Scotland and head of the Scottish Government. The First Minister chairs the Scottish Cabinet and is primarily responsible for the formulation, development and presentation of Scottish Government policy...
of Scotland
Scotland
Scotland is a country that is part of the United Kingdom. Occupying the northern third of the island of Great Britain, it shares a border with England to the south and is bounded by the North Sea to the east, the Atlantic Ocean to the north and west, and the North Channel and Irish Sea to the...
, said "we have everything it takes for a Celtic Lion economy to take off in Scotland" (the lion rampant
Royal Standard of Scotland
The Royal Standard of Scotland, , also known as the Banner of the King of Scots, or more commonly the Lion Rampant of Scotland, is the Scottish Royal Banner of Arms...
is the heraldic symbol of Scotland).
The onset of the Irish economic crisis and bank bailout prompted Scottish Labour Party leader Iain Gray
Iain Gray
Iain Gray is a Scottish politician and the Leader of Scottish Labour Party Opposition in the Scottish Parliament. Gray was elected as the Member of the Scottish Parliament for the East Lothian constituency in 2007 having previously represented Edinburgh Pentlands from 1999 to 2003.-Background and...
to ridicule Salmond's aspiration, telling the Scottish Parliament in 2010 that "Scotland’s banking sector is ten times the size of Ireland’s. The Royal Bank of Scotland alone had a balance sheet 15 times the size of the Scottish economy. Alex Salmond just does not get it. Everyone in Scotland knows that in a separate Scotland our two biggest banks would have gone and with them all the jobs, all the savings, all the pensions, all the mortgages and all the salaries."
Celtic Tiger
From 1995 to 2000 GDP rate growth ranged between 7.8 and 11.5%. The rate then slowed to between 4.4 to 6.5% from 2001 to 2007. During that period the Irish GDP rose dramatically to equal then eventually surpass that of all but one state in Western EuropeWestern Europe
Western Europe is a loose term for the collection of countries in the western most region of the European continents, though this definition is context-dependent and carries cultural and political connotations. One definition describes Western Europe as a geographic entity—the region lying in the...
. Although the GDP does not represent the standard of living
Standard of living
Standard of living is generally measured by standards such as real income per person and poverty rate. Other measures such as access and quality of health care, income growth inequality and educational standards are also used. Examples are access to certain goods , or measures of health such as...
, and the GNP remained lower than the GDP, in 2007 the GNP achieved the same level as of some other Western European countries.
Tax
Many economists credit Ireland's growth to a low corporate taxCorporate tax
Many countries impose corporate tax or company tax on the income or capital of some types of legal entities. A similar tax may be imposed at state or lower levels. The taxes may also be referred to as income tax or capital tax. Entities treated as partnerships are generally not taxed at the...
ation rate (10 to 12.5 percent throughout the late 1990s), and to net transfer payment
Transfer payment
In economics, a transfer payment is a redistribution of income in the market system. These payments are considered to be exhaustive because they do not directly absorb resources or create output...
s from members of the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
like Germany
Economy of Germany
Germany is the largest national economy in Europe, the fourth-largest by nominal GDP in the world, and fifth by GDP in 2008. Since the age of industrialisation, the country has been a driver, innovator, and beneficiary of an ever more globalised economy...
and France
Economy of France
France is the world's fifth largest economy by nominal figures and the ninth largest economy by PPP figures. It is the second largest economy in Europe in nominal figures and third largest economy in Europe in PPP figures...
that were as high as 4% of gross national product. Since 1956, successive Irish governments have pursued low taxation policies.
EU Aid
The EU aid was used to increase investment in the education systemEducation in the Republic of Ireland
The levels of education in Ireland are primary, secondary and higher education. In recent years further education has grown immensely. Growth in the economy since the 1960s has driven much of the change in the education system. Education in Ireland is free at all levels, including college , but...
and physically helping infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
. The increased productive capacity of the Irish economy is sometimes attributed to these investments, which made Ireland more attractive to high-tech businesses, though the libertarian Cato Institute
Cato Institute
The Cato Institute is a libertarian think tank headquartered in Washington, D.C. It was founded in 1977 by Edward H. Crane, who remains president and CEO, and Charles Koch, chairman of the board and chief executive officer of the conglomerate Koch Industries, Inc., the largest privately held...
has suggested that the EU transfer payments were economically inefficient and may have actually slowed growth. The conservative Heritage Foundation
Heritage Foundation
The Heritage Foundation is a conservative American think tank based in Washington, D.C. Heritage's stated mission is to "formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong...
also attributed transfer payments with no significant role in causing growth. Ireland's membership in the European Union since 1973 helped the country gain access to Europe's large markets. Ireland's trade had previously been predominantly with the United Kingdom
Economy of the United Kingdom
The economy of the United Kingdom is the sixth-largest national economy in the world measured by nominal GDP and seventh-largest measured by purchasing power parity , and the third-largest in Europe measured by nominal GDP and second-largest measured by PPP...
.
Industrial Policies
In the 1990s, the provision of subsidies and investment capital by Irish state organisations (such as IDA IrelandIDA Ireland
IDA Ireland is the agency responsible for industrial development in Ireland. The agency was founded in 1949 as the Industrial Development Authority and placed on a statutory footing a year later...
) encouraged high-profile companies like Dell
Dell
Dell, Inc. is an American multinational information technology corporation based in 1 Dell Way, Round Rock, Texas, United States, that develops, sells and supports computers and related products and services. Bearing the name of its founder, Michael Dell, the company is one of the largest...
, Intel, and Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...
to locate in Ireland. These companies were attracted to Ireland because of its European Union membership, relatively low wage
Wage
A wage is a compensation, usually financial, received by workers in exchange for their labor.Compensation in terms of wages is given to workers and compensation in terms of salary is given to employees...
s, government grants
Grant (money)
Grants are funds disbursed by one party , often a Government Department, Corporation, Foundation or Trust, to a recipient, often a nonprofit entity, educational institution, business or an individual. In order to receive a grant, some form of "Grant Writing" often referred to as either a proposal...
and low tax rates. Enterprise Ireland, a state agency, provides financial, technical and social support to start-up businesses.
The building of the International Financial Services Centre
International Financial Services Centre
The International Financial Services Centre is a major financial services centre in North Wall, Dublin, Ireland. The centre employs 14,000 people and was the brainchild of an associate of businessman Dermot Desmond...
in Dublin led to the creation of 14,000 high-value jobs in the accounting, legal and financial management sectors.
In July 2003 the government established the Science Foundation Ireland
Science Foundation Ireland
Science Foundation Ireland ), is the statutory body in the Republic of Ireland with responsibility for disbursing funds for basic science research with a strategic focus...
on a statutory basis to promote education for highly-skilled careers, particularly in biotechnology and information&communications technology, with the additional purpose to invest in science initiatives that aim to further Ireland's knowledge economy
Knowledge economy
The knowledge economy is a term that refers either to an economy of knowledge focused on the production and management of knowledge in the frame of economic constraints, or to a knowledge-based economy. In the second meaning, more frequently used, it refers to the use of knowledge technologies to...
.
Geography and Demographics
A favourable time zoneTime zone
A time zone is a region on Earth that has a uniform standard time for legal, commercial, and social purposes. In order for the same clock time to always correspond to the same portion of the day as the Earth rotates , different places on the Earth need to have different clock times...
difference allows Irish and British employees to work the first part of each day while U.S. workers sleep. U.S. firms were drawn to Ireland by cheap wage costs compared to the UK, and by the limited government intervention in business compared to other EU members, and particularly to countries in Eastern Europe. Growing stability in Northern Ireland
Northern Ireland
Northern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...
brought about by the Good Friday Agreement further established Ireland's ability to provide a stable business environment.
Irish workers can communicate effectively with Americans — especially compared to other low-wage EU nations such as Portugal
Portugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...
and Spain
Spain
Spain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
. This factor was vital to U.S. companies choosing Ireland for their European headquarters. It has also been argued that the demographic dividend
Demographic dividend
The demographic dividend is a rise in the rate of economic growth due to a rising share of working age people in a population. This usually occurs late in the demographic transition when the fertility rate falls and the youth dependency rate declines. During this demographic window of opportunity,...
from the rising ratio of workers to dependents due to falling fertility, and increased female labour market participation, increased income per capita.
Consequences
Ireland was transformed from one of the poorest countries in Western Europe to one of the wealthiest. Disposable incomeDisposable income
Disposable income is total personal income minus personal current taxes. In national accounts definitions, personal income, minus personal current taxes equals disposable personal income...
soared to record levels, enabling a huge rise in consumer spending. Unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
fell from 18% in the late 1980s to 4.5% by the end of 2007, and average industrial wages grew at one of the highest rates in Europe. Inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
brushed 5% per annum towards the end of the 'Tiger' period, pushing Irish prices up to those of Nordic Europe, even though wage rates are roughly the same as in the UK. The National debt has remained constant during the boom, but the GDP to Debt ratio has dropped, due to the dramatic rise in GDP. ".
The new wealth resulted in large investments in modernising Irish infrastructure and cities. The National Development Plan
National Development Plan
National Development Plan is the title given by the Irish Government to a scheme of organised large-scale expenditure on national infrastructure. The period covered by the seven year plan runs from 2000 to 2006. A second National Development Plan is currently in progress and is due to run until...
led to improvements in roads, and new transport services were developed, such as the Luas
Luas
Luas , also promoted in the development stage as the Dublin Light Rail System, is a tram or light rail system serving Dublin, the first such system in the decades since the closure of the last of the Dublin tramways. In 2007, the system carried 28.4 million passengers, a growth of 10% since...
light rail lines, the Dublin Port Tunnel
Dublin Port Tunnel
The Dublin Port Tunnel is a road traffic tunnel in Dublin, Ireland, that forms part of the M50 motorway....
, and the extension of the Cork Suburban Rail
Cork Suburban Rail
The Cork Suburban Rail network serves the Metropolitan Cork area in County Cork, Munster, Ireland.There has been a suburban rail system in Cork since the middle of the 19th century however it suffered serious neglect and line closures in the 20th century...
. Local authorities enhanced city streets, and built monuments like the Spire of Dublin
Spire of Dublin
The Spire of Dublin, officially titled the Monument of Light is a large, stainless steel, pin-like monument in height, located on the site of the former Nelson's Pillar on O'Connell Street in Dublin, Ireland.-Details:...
.
Ireland's trend of net emigration was reversed as the republic became a destination for immigrants. This significantly changed Irish demographics and resulted in expanding multiculturalism
Multiculturalism
Multiculturalism is the appreciation, acceptance or promotion of multiple cultures, applied to the demographic make-up of a specific place, usually at the organizational level, e.g...
, particularly in the Dublin, Cork
Cork (city)
Cork is the second largest city in the Republic of Ireland and the island of Ireland's third most populous city. It is the principal city and administrative centre of County Cork and the largest city in the province of Munster. Cork has a population of 119,418, while the addition of the suburban...
, Limerick
Limerick
Limerick is the third largest city in the Republic of Ireland, and the principal city of County Limerick and Ireland's Mid-West Region. It is the fifth most populous city in all of Ireland. When taking the extra-municipal suburbs into account, Limerick is the third largest conurbation in the...
and Galway
Galway
Galway or City of Galway is a city in County Galway, Republic of Ireland. It is the sixth largest and the fastest-growing city in Ireland. It is also the third largest city within the Republic and the only city in the Province of Connacht. Located on the west coast of Ireland, it sits on the...
areas. It was estimated in 2007 that 10% of Irish residents were foreign-born. Most of the new arrivals were citizens of Poland and the Baltic states, many of whom found work in the retail and service sectors. Within Ireland, many young people left the rural countryside to live and work in urban centres. The growing success of Ireland's economy encouraged entrepreneurship
Entrepreneurship
Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response...
and risk-taking, qualities that had been dormant during poor economic periods. However, whilst some semblance of a culture of entrepreneurship exists, foreign-owned companies account for 93% of Ireland's exports.
Many people in Ireland believe that growing consumerism during the boom years eroded the country's culture
Culture of Ireland
This article is about the modern culture of Ireland and the Irish people. It includes customs and traditions, language, music, art, literature, folklore, cuisine and sport associated with Ireland and Irish people today. However, the culture of the people living in Ireland is not homogeneous...
, with the adoption of American capitalist
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
ideals. While Ireland's historical economic ties to the United Kingdom had often been the subject of criticism, Peader Kirby argues that the new ties to the U.S. economy were met with a "satisfied silence." Nevertheless, voices on the left have decried the "closer to Boston than Berlin" philosophy of the government parties. Writers such as William Wall
William Wall
William "Bill" Wall is an Irish novelist, poet and short story writer. He was born in Cork City in 1955, but grew up in the coastal village of Whitegate. He received his secondary education at the Christian Brothers School in Midleton. He progressed to University College Cork where he graduated in...
, Mike McCormick and Gerry Murphy
Gerry Murphy (poet)
Gerry Murphy is an Irish poet.-Life & work:Gerry Murphy was born in Cork City in 1952. His work is witty, openly intellectual and often satirical and is "highly, self-consciously literary"...
have satirised these developments.
Similarly, many Irish people maintain what they consider a pragmatic approach to immigration, saying that it is necessary to bring about further GDP growth and that Ireland, as a nation with a long history of emigration, has an obligation to accept immigrants.
Growing wealth was blamed for rising crime levels among youths, particularly alcohol-related violence resulting from increased spending power. However it was also accompanied by rapidly increased life expectancy and very high quality of life ratings (indeed, the country ranked first in The Economist's quality of life index).
Banking Scandals
The New York Times in 2005 described Ireland as the "Wild West of European finance", a perception that helped prompt the creation of the Irish Financial Services Regulatory Authority.Despite its mandate for stricter oversight, the agency never imposed major sanctions on any Irish institution, even though Ireland had experienced several major banking scandals in overcharging of their customers. Industry representatives disputed the idea that Ireland may be home to unchecked financial frauds. In December 2008, irregularities in directors loans, that were kept off a bank's balance sheet for eight years forced the resignation of the financial regulator.
Economic commentator David McWilliams
David McWilliams
David McWilliams is an Irish journalist and economist. McWilliams has worked with as an economist with Central Bank of Ireland and as a banker with UBS bank and the Banque Nationale de Paris...
has described the collapse of Anglo Irish Bank as Ireland's Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
.
Downturn, 2001–2003
The Celtic Tiger's momentum slowed sharply in 2002, after seven years of high growth. The Irish economic downturn was in line with the worldwide downturn.The economy was impacted by a large reduction in investment in the worldwide information technology
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...
(IT) industry. The industry had over-expanded in the late 1990s, and its stock market equity declined sharply. Ireland was a major player in the IT industry: In 2002, it had exported US$10.4 billion worth of computer services, compared to $6.9 billion from the United States. Ireland accounted for approximately 50 percent of all mass-market packaged software sold in Europe in 2002 (OECD, 2002; OECD, 2004).
Foot and mouth disease and the September 11, 2001 attacks
September 11, 2001 attacks
The September 11 attacks The September 11 attacks The September 11 attacks (also referred to as September 11, September 11th or 9/119/11 is pronounced "nine eleven". The slash is not part of the pronunciation...
damaged Ireland's tourism and agricultural sectors, deterring U.S. and British tourists. Several companies moved operations to Eastern Europe
Eastern Europe
Eastern Europe is the eastern part of Europe. The term has widely disparate geopolitical, geographical, cultural and socioeconomic readings, which makes it highly context-dependent and even volatile, and there are "almost as many definitions of Eastern Europe as there are scholars of the region"...
and the People's Republic of China
Economy of the People's Republic of China
The People's Republic of China ranks since 2010 as the world's second largest economy after the United States. It has been the world's fastest-growing major economy, with consistent growth rates of around 10% over the past 30 years. China is also the largest exporter and second largest importer of...
because of a rise in Irish wage costs, insurance premiums, and a general reduction in Ireland's economic competitiveness. The rising value of the Euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
hit non-EMU
Economic and monetary union
An economic and monetary union is a type of trade bloc which is composed of an economic union with a monetary union. It is to be distinguished from a mere monetary union , which does not involve a common market. This is the fifth stage of economic integration...
exports, particularly those to the U.S. and the United Kingdom.
At the same time, economies globally experienced a slowdown. The economy of the United States grew only 0.3% in April, May and June 2002 from a year earlier. The Federal Reserve made 11 rate cuts that year in an attempt to stimulate the U.S. economy. In Europe, the EU scarcely grew throughout the whole of 2002, and many governments (notably Germany and France) lost control of public finance
Public finance
Public finance is the revenue and expenditure of public authoritiesThe purview of public finance is considered to be threefold: governmental effects on efficient allocation of resources, distribution of income, and macroeconomic stabilization.-Overview:The proper role of government provides a...
s, causing large deficits that broke the terms of the EMU Stability and Growth Pact
Stability and Growth Pact
The Stability and Growth Pact is an agreement among the 27 Member states of the European Union that take part in the Eurozone, to facilitate and maintain the stability of the Economic and Monetary Union...
.
The economic downturn in Ireland was not a recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
but a slowdown in the rate of economic expansion. Signs of a recovery became evident in late 2003 as U.S. investment levels increased once again. Many senior economists have heavily criticised the Government and the economic imbalance in favour of the construction industry and the prospect of sustaining economic growth in the future.
Post-2003 resurgence
Economy of Italy
Italy has a diversified industrial economy with high gross domestic product per capita and developed infrastructure. According to the International Monetary Fund, the World Bank and the CIA World Factbook, in 2010 Italy was the seventh-largest economy in the world and the third-largest in Europe...
.
In 2006 there was a surge in Foreign Direct Investment and a net increase of 3,795 in IDA supported jobs with International and Financial Services having the highest growth rate.
The reasons for the continuation of the Irish economic boom were somewhat controversial within Ireland. Skeptics said that the recent growth was merely due to a great increase in property values
Irish property bubble
The property bubble in the Republic of Ireland began in 2000 and peaked in 2006, as with many other western European countries, with a combination of increased speculative construction and rapidly rising prices....
, and to catch-up growth in employment in the construction sector.
Globally, the U.S. recovery boosted Ireland's economy due to Ireland's close economic ties to the U.S. The decline in tourism as a result of foot and mouth disease and the September 11, 2001 attacks
September 11, 2001 attacks
The September 11 attacks The September 11 attacks The September 11 attacks (also referred to as September 11, September 11th or 9/119/11 is pronounced "nine eleven". The slash is not part of the pronunciation...
had reversed itself. The recovery of the global information technology industry was also a factor: Ireland produced 25% of all European PCs
Personal computer
A personal computer is any general-purpose computer whose size, capabilities, and original sales price make it useful for individuals, and which is intended to be operated directly by an end-user with no intervening computer operator...
, and Dell
Dell
Dell, Inc. is an American multinational information technology corporation based in 1 Dell Way, Round Rock, Texas, United States, that develops, sells and supports computers and related products and services. Bearing the name of its founder, Michael Dell, the company is one of the largest...
, IBM
IBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
, Apple
Apple Computer
Apple Inc. is an American multinational corporation that designs and markets consumer electronics, computer software, and personal computers. The company's best-known hardware products include the Macintosh line of computers, the iPod, the iPhone and the iPad...
and HP
Hewlett-Packard
Hewlett-Packard Company or HP is an American multinational information technology corporation headquartered in Palo Alto, California, USA that provides products, technologies, softwares, solutions and services to consumers, small- and medium-sized businesses and large enterprises, including...
all had sizeable Irish operations, with Dell
Dell
Dell, Inc. is an American multinational information technology corporation based in 1 Dell Way, Round Rock, Texas, United States, that develops, sells and supports computers and related products and services. Bearing the name of its founder, Michael Dell, the company is one of the largest...
having its major European manufacturing plant in Limerick
Limerick
Limerick is the third largest city in the Republic of Ireland, and the principal city of County Limerick and Ireland's Mid-West Region. It is the fifth most populous city in all of Ireland. When taking the extra-municipal suburbs into account, Limerick is the third largest conurbation in the...
.
There has been a renewed investment by multi-national firms. Intel had resumed its Irish expansion, Google
Google
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
created an office in Dublin, Abbott Laboratories
Abbott Laboratories
Abbott Laboratories is an American-based global, diversified pharmaceuticals and health care products company. It has 90,000 employees and operates in over 130 countries. The company headquarters are in Abbott Park, North Chicago, Illinois. The company was founded by Chicago physician, Dr....
was building a new Irish facility and Bell Labs
Bell Labs
Bell Laboratories is the research and development subsidiary of the French-owned Alcatel-Lucent and previously of the American Telephone & Telegraph Company , half-owned through its Western Electric manufacturing subsidiary.Bell Laboratories operates its...
were to open a future facility.
Domestically, a new state body, Science Foundation Ireland
Science Foundation Ireland
Science Foundation Ireland ), is the statutory body in the Republic of Ireland with responsibility for disbursing funds for basic science research with a strategic focus...
, was established to promote new science companies in Ireland Maturing funds from the SSIA government savings scheme relaxed consumers' concerns about spending and thus fuelled retail sales growth.
In September 2009, Tánaiste
Tánaiste
The Tánaiste is the deputy prime minister of Ireland. The current Tánaiste is Eamon Gilmore, TD who was appointed on 9 March 2011.- Origins and etymology :...
Mary Coughlan, said Ireland had lost ground in international competitiveness every year since 2000.
Challenges
Property market
The return of the boom in 2004 is claimed to be primarily the result of the large construction sector catching up with the demand caused by the first boom. The construction sector represented nearly 12% of GDP and a large proportion of employment among young, unskilled men. A number of sources, including The EconomistThe Economist
The Economist is an English-language weekly news and international affairs publication owned by The Economist Newspaper Ltd. and edited in offices in the City of Westminster, London, England. Continuous publication began under founder James Wilson in September 1843...
, warned of excessive Irish property values
Irish property bubble
The property bubble in the Republic of Ireland began in 2000 and peaked in 2006, as with many other western European countries, with a combination of increased speculative construction and rapidly rising prices....
. 2004 saw the construction of 80,000 new homes, compared to the United Kingdom's 160,000 – a nation that has 15 times Ireland's population. It is estimated that home completions in 2006 may have reached 90,000.
In January 2009 UCD
University College Dublin
University College Dublin ) - formally known as University College Dublin - National University of Ireland, Dublin is the Republic of Ireland's largest, and Ireland's second largest, university, with over 1,300 faculty and 17,000 students...
economist Morgan Kelly predicted that house prices would fall by 80 per cent from peak to trough in real terms.
Loss of competitiveness
Rising wages, inflation and excessive public spending led to a loss of competitiveness in the Irish economy. Irish wages are now substantially above the EU average, particularly in the Dublin region. Low-paid sectors such as retail and hospitality remained below the EU-15 average however. The pressures primarily affect unskilled, semi-skilled, and manufacturing jobs. Outsourcing of professional jobs is also increasing, with PolandPoland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
in 2008 gaining several hundred former Irish jobs from the accountancy division of Philips
Philips
Koninklijke Philips Electronics N.V. , more commonly known as Philips, is a multinational Dutch electronics company....
and Dell
Dell
Dell, Inc. is an American multinational information technology corporation based in 1 Dell Way, Round Rock, Texas, United States, that develops, sells and supports computers and related products and services. Bearing the name of its founder, Michael Dell, the company is one of the largest...
.
Promotion of indigenous industry
One of the major challenges facing Ireland is the successful promotion of indigenous industry. Although Ireland boasts a few large international companies, such as AIBAllied Irish Banks
Allied Irish Banks p.l.c. is a major commercial bank based in Ireland.AIB is one of the so called "big four" commercial banks in the state. The bank has one of the largest branch networks in Ireland; only Bank of Ireland fully rivals it. AIB offers a full range of personal and corporate banking...
, CRH
CRH
CRH can refer to:* Choate Rosemary Hall, a private boarding school in Wallingford, Connecticut* Crimean Tatar language, ISO 639-2 code for Crimean Tatar language* Celtic Resources Holdings plc, an Irish mining company...
, Kerry Group
Kerry Group
Kerry Group , is a public food company headquartered in Ireland. It is quoted on the Dublin ISEQ and London stock exchanges. It evolved initially from a local dairy co-op in the Munster region of Ireland...
, Smurfit Kappa Group
Smurfit Kappa Group
The Smurfit Kappa Group is Europe's leading corrugated packaging company, following the merger of Jefferson Smurfit Group and Kappa Packaging. This merger was finalized by the end of 2005...
, Élan
Élan
Élan Corporation plc is a major drugs firm based in Athlone, County Roscommon, Ireland which has major interests in the United States. In the late 1990s its value on the Irish Stock Exchange reached over €20bn. It has secondary listings on the London Stock Exchange and the New York Stock Exchange....
and Ryanair
Ryanair
Ryanair is an Irish low-cost airline. Its head office is at Dublin Airport and its primary operational bases at Dublin Airport and London Stansted Airport....
, there are few companies with over one billion euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
s in annual revenue. The government has charged Enterprise Ireland with the task of boosting Ireland's indigenous industry. The government launched a Web site in 2003 with the objective of streamlining and marketing the process of starting a business in Ireland.
Reliance on foreign energy sources
Ireland relies on imported fossil fuels for over 80% of its energy. Ireland for many years in the middle twentieth century limited its dependence on external energy sources by developing its peatPeat
Peat is an accumulation of partially decayed vegetation matter or histosol. Peat forms in wetland bogs, moors, muskegs, pocosins, mires, and peat swamp forests. Peat is harvested as an important source of fuel in certain parts of the world...
bogs, building various hydroelectric projects including a dam at Ardnacrusha
Ardnacrusha (village)
Ardnacrusha is a village in County Clare, Munster, Ireland located on the northern bank of the Shannon River. The name derives from the phrase Ard na Croise meaning "the height of the cross", due to a large cross marker placed there in 1111 A.D...
on the River Shannon
River Shannon
The River Shannon is the longest river in Ireland at . It divides the west of Ireland from the east and south . County Clare, being west of the Shannon but part of the province of Munster, is the major exception...
in 1928, and developing offshore
Oil platform
An oil platform, also referred to as an offshore platform or, somewhat incorrectly, oil rig, is a lаrge structure with facilities to drill wells, to extract and process oil and natural gas, and to temporarily store product until it can be brought to shore for refining and marketing...
gas fields and diversifying into coal in the 1970s. Gas, peat and hydroelectric power have been almost fully exploited in Ireland. This situation has led to a continuously increasing need for fossil fuels at a time of increasing concerns about security of supply
Peak oil
Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. This concept is based on the observed production rates of individual oil wells, projected reserves and the combined production rate of a field...
and global warming
Global warming
Global warming refers to the rising average temperature of Earth's atmosphere and oceans and its projected continuation. In the last 100 years, Earth's average surface temperature increased by about with about two thirds of the increase occurring over just the last three decades...
. One solution is to develop alternative energy sources including wind power
Wind power
Wind power is the conversion of wind energy into a useful form of energy, such as using wind turbines to make electricity, windmills for mechanical power, windpumps for water pumping or drainage, or sails to propel ships....
and, to a lesser extent, wave power
Wave power
Wave power is the transport of energy by ocean surface waves, and the capture of that energy to do useful work — for example, electricity generation, water desalination, or the pumping of water...
. Wind however is not a panacea as it needs to have conventional plants to augment it. An offshore wind farm
Wind farm
A wind farm is a group of wind turbines in the same location used to produce electric power. A large wind farm may consist of several hundred individual wind turbines, and cover an extended area of hundreds of square miles, but the land between the turbines may be used for agricultural or other...
is currently under construction off the east coast near Arklow
Arklow
Arklow , also known as Inbhear Dé from the Avonmore river's older name Abhainn Dé, is a historic town located in County Wicklow on the east coast of Ireland. Founded by the Vikings in the ninth century, Arklow was the site of one of the bloodiest battles of the 1798 rebellion...
, and many remote locations in the west show potential for wind farm development. A report by Sustainable Energy Ireland indicated that if wind power were properly developed, Ireland could one day be exporting excess wind power if the natural difficulties of integrating wind power into the national grid are solved. Wind power by November 2009 already accounted for 15.4% of total installed generating capacity in the state. By 2020 the Irish government forecasts that 40% of the countries energy needs will come from renewable sources, well above the EU average.
Distribution of wealth
Ireland's new wealth is not evenly distributed. The United Nations reported in 2004 that Ireland was second only to the United States in inequality among Western nations. There is some opposition to the theory that Ireland's wealth has been unusually unevenly distributed, among them economist and journalist David McWilliamsDavid McWilliams
David McWilliams is an Irish journalist and economist. McWilliams has worked with as an economist with Central Bank of Ireland and as a banker with UBS bank and the Banque Nationale de Paris...
. He cites Eurostat
Eurostat
Eurostat is a Directorate-General of the European Commission located in Luxembourg. Its main responsibilities are to provide the European Union with statistical information at European level and to promote the integration of statistical methods across the Member States of the European Union,...
figures which indicate that Ireland is just above average in terms equality by one type of measurement. However, while it is better off by this measurement than generally less developed and/or more free market countries like Britain, the Mediterranean and the new accession states, Ireland is still more unequal than the Scandinavan countries, Germany and France.
Moreover, Ireland's inequality persists by other measurements. According to an ESRI report published in December 2006 is the 22nd best out of the 26 richest countries in terms of the level of its child poverty; and the 2nd most unequal country in Europe.
Downturn and ESRI forecast
In an economic analysis, the Economic and Social Research InstituteEconomic and Social Research Institute
The Economic and Social Research Institute is a think tank in Dublin, Ireland. Its research focuses on Ireland's economic and social development in order to inform policy-making and societal understanding....
(ESRI) on June 24, 2008 forecast that there was a possibility the Irish economy would experience marginal negative growth in 2008. This would be the first time since 1983. Outlining possible prospects for the economy for 2008, the ESRI said output of goods and services may fall that year—which would be the Irish definition of a mild recession. It also predicted a recovery in 2009 and 2010.
In September 2008, Ireland became the first eurozone country to officially enter recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
.
The recession was confirmed by figures from the Central Statistics Office showing the bursting of the property bubble and a collapse in consumer spending terminated the boom that was the Celtic Tiger.
The figures show the gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
(GDP), which measures the value of all the goods and services produced in the State, fell 0.8% in the second three months of 2008 compared with the same quarter of 2007. That was the second successive quarter of negative economic growth, which is the definition of a recession.
This is the first time since 1983, that the economy has been hit by falling growth, or recession.
In a November 2008 interview in Hot Press
Hot Press
Hot Press is a fortnightly music and political magazine based in Dublin, Ireland founded in 1977. The magazine has been edited since its inception by Niall Stokes. According to the Audit Bureau of Circulations, it had a circulation of 19,215 during 2007...
in a grim assessment of where Ireland stood, Taoiseach
Taoiseach
The Taoiseach is the head of government or prime minister of Ireland. The Taoiseach is appointed by the President upon the nomination of Dáil Éireann, the lower house of the Oireachtas , and must, in order to remain in office, retain the support of a majority in the Dáil.The current Taoiseach is...
Brian Cowen
Brian Cowen
Brian Cowen is a former Irish politician who served as Taoiseach of Ireland from 7 May 2008 to 9 March 2011. He was head of a coalition government led by Fianna Fáil which until 23 January 2011 had the support of the Green Party and independent TDs.Cowen was also leader of Fianna Fáil from 7 May...
said that many people still did not realise how badly shaken the public finances were.
By 30 January 2009, Ireland’s government debt had become the riskiest in the euro zone, surpassing Greece’s sovereign bonds, according to credit-default swap prices.
In February 2009, Taoiseach
Taoiseach
The Taoiseach is the head of government or prime minister of Ireland. The Taoiseach is appointed by the President upon the nomination of Dáil Éireann, the lower house of the Oireachtas , and must, in order to remain in office, retain the support of a majority in the Dáil.The current Taoiseach is...
Brian Cowen
Brian Cowen
Brian Cowen is a former Irish politician who served as Taoiseach of Ireland from 7 May 2008 to 9 March 2011. He was head of a coalition government led by Fianna Fáil which until 23 January 2011 had the support of the Green Party and independent TDs.Cowen was also leader of Fianna Fáil from 7 May...
said that Ireland's economy appeared on course to contract by 6.5 percent in 2009.
Aftermath
Former TaoiseachTaoiseach
The Taoiseach is the head of government or prime minister of Ireland. The Taoiseach is appointed by the President upon the nomination of Dáil Éireann, the lower house of the Oireachtas , and must, in order to remain in office, retain the support of a majority in the Dáil.The current Taoiseach is...
Garret FitzGerald
Garret FitzGerald
Garret FitzGerald was an Irish politician who was twice Taoiseach of Ireland, serving in office from July 1981 to February 1982 and again from December 1982 to March 1987. FitzGerald was elected to Seanad Éireann in 1965 and was subsequently elected to Dáil Éireann as a Fine Gael TD in 1969. He...
has blamed Ireland's dire economic state in 2009 on a series of "calamitous" government policy errors.
Between the years of 2000 and 2003 the then Finance Minister Charlie McCreevy
Charlie McCreevy
Charles "Charlie" McCreevy is a former Irish politician. He was the European Commissioner for Internal Market and Services from 2004–2010. He was first elected to Dáil Éireann as a Fianna Fáil TD in 1977 and held the seat in Kildare until 2004 when he became Ireland's European Commissioner...
boosted public spending by 48% while cutting income tax.
A second problem occurred when government policies allowed, or even encouraged, a housing bubble to develop, "on an immense scale".
Nobel laureate Paul Krugman
Paul Krugman
Paul Robin Krugman is an American economist, professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times...
had a bleak prediction,
“As far as responding to the recession goes, Ireland appears to be really, truly without options, other than to hope for an export-led recovery, if and when the rest of the world bounces back.”
The International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
in mid April 2009 forecasted a very poor outlook for Ireland. It projected that the Irish economy would contract by 8 per cent in 2009 and by 3 per cent in 2010 – and that might be on the optimistic side.
Unemployment in Ireland is forecasted to rise almost 17 per cent in 2010, the Economic and Social Research Institute
Economic and Social Research Institute
The Economic and Social Research Institute is a think tank in Dublin, Ireland. Its research focuses on Ireland's economic and social development in order to inform policy-making and societal understanding....
(ESRI) stated in a report published on 2009-04-28
, however the unemployment rate in 2010 steadied at a rate of 14%.On November 19, 2010, The Irish Government had begun talks on a multi-billion-dollar economic bail-out package with experts from the International Monetary Fund (IMF) and the European Union.
See also
- Four Asian Tigers
- Gulf TigerGulf TigerThe Gulf Tiger or Arab Gulf Tiger is a nickname used to describe the period of rapid economic growth in the city of Dubai. The boom that Dubai has been experiencing since the 1990s is still going on, transforming the city from a desert village to a world class economic hub.- Characteristics :The...
- Ghost estateGhost estateA ghost estate is an unoccupied housing estate built on the island of Ireland, most particularly the Republic of Ireland, during the period of economic growth when the Irish economy was known as the Celtic tiger. A massive surplus of housing, combined with the late-2000s recession, resulted in a...
- Baltic TigerBaltic TigerBaltic Tiger is a term used to refer to any of the three Baltic states of Estonia, Latvia, and Lithuania during their periods of economic boom, which started after the year 2000 and continued until 2006–2007...
- PIGS (economics)PIGS (economics)PIGS is an acronym used to refer to the economies of Portugal, Italy, Greece and Spain. Originally, the term was used to group these economies as being similar economic environments. Since the European sovereign debt crisis, with the addition of Ireland, the term is used to group European...