Tuesday, September 23, 2014

Ireland's Economy Rockets Skyward. Celtic Tiger 2.0 Rises from the Ashes. But is it Sustainable?

We have ignition and lift off. According to recent economic statistics, Ireland's economy is surging with growth not seen since the demise of the Celtic Tiger in 2008. According to the Irish Times, Ireland's economy is growing at the fastest rate in seven years, recording a 7.7 percent explosion in the year ending June 2014. Moreover, Ireland's politicians gazed into their (ever cloudy and broken) crystal ball and upped the growth forecast for the rest of the year. And of course, those same politicians took delight in waxing lyrical about the stringent measures that they believe scored the big results.

According to various sources, Ireland' phoenix-like reincarnation has been sparked by a number of factors: employment and consumer spending is up (how 'up' is, however, uncertain). Exports are burgeoning. Local industries including tech, pharmaceuticals, tourism, health - and wait for it - the construction sectors are hiring. In many cases, they can't get enough qualified people to fill job vacancies because everyone emigrated.

Which of course means - if you believe the press and government - that unemployment should soon be falling like a brick. And if you're interested in coming to Ireland to job hunt, now is the time.

Growth of 7.7 per year is phenomenal by any measure. Other Eurozone economies (think Germany, France, Spain, and the rest of the PIGS) drool at such a display. But is Ireland's rebound a long-term reality or a flash in the pan?

The people of this country have taken a beating. The average industrial worker making just over 30,000 euro a year has an effective marginal tax rate of - wait for it - 52 percent due to tax increases that only went one way - up, up, up. This does not include so-called 'stealth' or invisible taxes. Taxes like VAT (now at 23 percent), or VRT on automobiles. Or the new property tax. Or the about to be introduced new water charges. Folks across the country - particularly the lower and middle economic classes  - have seen take home pay fall (if they still had a job, of course) while public services have also crashed. In 2007 and 2008, they watched helplessly from the side as the government mortgaged everyone's future to underwrite failing banks and a failing economy. The debt burden in this country is phenomenal: it now stands at over 181 billion euro (go to the debt clock for more. Ireland's debt mountain is continuing to spiral upward). That's over 100 percent of the country's Gross Domestic Product. That's a hell of a lot of money to pay back.

That burden will be there for generations to come. And it will slow Ireland's recovery. At the same time, the country is in danger of overheating yet again. Already, house prices in Dublin are soaring out of control, and are now almost level with Bubble prices last seen in 2008.  Inflation is starting to once again inch up. Workers are (rightly) demanding less taxes, more pay raises, and increased public services to replace what was lost during the dreadful Crash.

Is this sustainable, this re-emergence of the Irish economy? I like to think so. But we'll carry the pain for years to come. I'll pay for it, my kids will pay for it, and my grand kids will keep on paying for it.

But let's ignore the future for a moment. Ireland has been in the depths of economic chaos and darkness for the past six years. At last, there seems to be a golden lining. Let's glory in that for the present.

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1 comment:

  1. One can only hope the Celtic Tiger doesn't turn into a Paper Tiger. I don't see how those taxes can be sustained by the Irish people. They are exorbitant. Are you getting what you pay for? There is a breaking point and I fear it will come soon.