Irish Economy Still in Bind, but Horizon is Brightening

Though the general economy in Ireland is causing severe problems today, two to three years from now we may be looking at a far stronger country than would be the case if the Irish had not gone through these difficult times.

Perhaps Ireland grew too fast, building a system without checks and balances. But that most assuredly will not happen again if the lessons learned today result in new attitudes and regulations discouraging skyrocketing prices, collapsing banks, and 120 percent mortgages on property of exaggerated value.

The tragic problems affecting nearly all Irish will get worse for a time, and much pain will accompany the drastic solutions required to right the economy and bring revenue and costs back into line again.

The boom years, however, financed Ireland out of third-world-country status and provided infrastructure, housing, and a positive investment appeal to foreign business that will give the country a big advantage in repairing its current problems.

A new Government operating plan to be put forth by the ruling Fianna Fail and Green Parties that is referred to as the "Budget" is being developed by An Taoiseach Brian Cowen and his ministers. It will be very difficult for the Irish people to accept. The Irish newspapers describe looming payroll cuts for government employees as "savage." Fees for university education will become far more burdensome, medical allowances will be cut, and school class sizes will increase if the new plan is enacted by the Irish parliament.

The legislative vote on the new plan is scheduled for early December.

Minister for Health Mary Harney said in Dublin last week that "the State is spending 500-million euro more each week than it is receiving in tax revenues." She warned that if the Government does not reduce public expenditure by at least 30 percent, the International Monetary Fund will assess drastic measures in order to keep Ireland solvent. Harney is one of a number of senior government ministers publicly backing severe action. To set a good example, ministers reportedly have already agreed to a reduction in their own salaries of 20 percent-to-25 percent.

The situation is so dire that even the major opposing political parties, Fine Gael and Labor, have been muted in their criticism because their options are limited.

The largest labor unions, even though they recognize how serious the revenue shortfall is, are trying to protect their members from deep cuts in pay. Protest meetings have been called for Fri., Nov. 6, in Dublin, Cork, Limerick, Sligo, Tullamore, Dundalk, and Waterford. Thousands will turn out to try to protect salaries and benefits. In late November the largest public union, IMPACT, will hold an "Industrial Action," which generally means a strike.

Two more dark clouds appeared in October.

Two years ago, the National Development Plan set aside 252-million euro as an investment in educating young Irish in information and communications technology. Then Minister of Education Mary Hanafin enthusiastically endorsed the expenditure as a way to keep Ireland youth competitive with those from other countries. Unfortunately, the money has not been spent and is now in doubt because of budget considerations. Long term, this is a real worry for a nation that is so dependent upon the technical expertise of its people.

Then the Central Statistics Office announced last month that tourism had fallen by nearly 600,000 through August, a 10.9 percent decline after many years of growth. After so much expenditure building the hotels, fixing the roads, improving the food, and creating golf courses everywhere, this came as another disappointment for everyone.

But with all this gloom and doom there is a brightening horizon. On Oct. 21, the Irish Times reported that the quarterly housing affordability index showed the cost of mortgages will have dropped by 50 percent in December. Young couples and even second-home buyers can obtain far less-costly new housing, and with far less risk (housing prices have plummeted) than over the past many years. Mortgage applications are up by 66 percent over the last three months and the housing market seems to be moving again. This will increase State revenue since such real estate transactions produce substantial taxes.

And the Government is getting very aggressive in courting foreign investment and long-term good will. Two major conferences were organized recently by Minister of Foreign Affairs Michael Martin. The Global Irish Economic Forum was held in Dublin, bringing together approximately 180 Irish, American and other businessmen to discuss and promote investment into Ireland. Martin also held a meeting of the newly formed Irish American Leadership Council in New York with representatives from Irish organizations from throughout the United States. Both of these efforts show pro-active thinking and serious action by the Government.

Looking at the glass as half-full rather than half-empty is simply a focus of attitude. Last week in Dublin the restaurants were full on Friday and Saturday evenings, the retail stores were doing business, and the resilience and enthusiasm of the people was very apparent.

A wise man will not bet against Ireland or the Irish.