Many business victims of the Ireland recession resemble this boarded-up UK pub (Photo: Geograph)
It was just a year ago that Ireland was in recession and losing a job every five minutes. Now the Wall Street Journal reports that the nation has officially exited the recession, based upon export-driven domestic product growth of 2.7 percent for Q1 2010. However, Ireland’s road to economic recovery remains long. One of the hardest-hit euro zone countries in the recent global recession, Ireland’s GDP had fallen by more than 14 percent entering 2010. As the New York Times indicates, a tremendous deficit and 13 percent unemployment have prompted Irish Prime Minister Brian Cowen to warn that there’s no easy way out of the economic quagmire.
Ireland and the recession: Investor confidence required
Ireland and its recession have continued largely because the country is paying much more on its benchmark bonds than more economically healthy euro zone countries, says the Times. This has given investors pause and has not reduced guaranteed loan borrowing, making it all the more difficult for Dublin to take care of business. Ireland’s primary goal is to restore investor confidence through deficit reduction, but higher taxes, lower salaries for public workers and the fallout of the burst housing bubble – including an uptick in the origination of low cost loans – have made it difficult for Ireland’s population to wait patiently.
Hanging their hat on exports
Ireland attracted companies like Intel, Microsoft, Facebook and LinkedIn to address previous recessionary woes, but this time, the Irish government is depending upon an export revival, according to the Times. Wage and energy cost decreases – as well as a falling euro – have “improved competitiveness,” writes the Times, but that may not create enough jobs. In fact, wage cuts have driven young workers away. They want instant money, not the promise of a better Ireland in 10 to 15 years, when experts predict future infrastructure spending will resume.
Prime Minister Cowen gritting teeth over 2012 elections
The long, hard road to economic recovery via tough deficit reduction may be the only way that Ireland will escape recession. However, politics are often a “What have you done for me lately?” arena. Prime Minister Cowen, despite his promise that he will not cut public salaries further in Ireland’s next budget, is on the ropes after the haymaker of public opinion. Irish voters may have had enough.
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