Sunday, January 12, 2014

The Irish Success Story In Perspective

Irish Banks borrowed a ton of money from European banks to fund its real estate boom.  The real estate bubble burst and the Irish banks were unable to service its debt.  The Irish government decided to guarantee the debt.  That helped the European banks but it caused the Irish government to cut back drastically on spending.  That was supposed to reduce Ireland's debt to GDP ratio, but the cuts in spending made the ratio worse.  The Irish debt is being divided by a much smaller GDP.  This is not a very good success story but those who sold Ireland on its austerity program still hail it as a success.

Another part of the Irish success story is its ability to attract high tech American companies to locate in Ireland.  They are attracted by the low tax rates and access to European markets from Ireland.  Outside of Dublin, however, is another Irish economy in which 25% of Irish households do not have a single employed person bringing in wages.  Ireland's biggest export has been the emigration of its educated population to countries with better job opportunities.  The Irish success stories continue, however, those who sold Ireland on austerity have a desperate need to use Ireland as a role model.

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