The Irish economy has recovered and support lies firmly with the EU | Dan O’Brien


Ireland was the poor man of North West Europe for most of the 20th century. Periphery, isolationism and political errors have plunged the country into relative poverty and stagnation. Few facts show better than employment how so little has changed in so long. In 1991 there were fewer people working in the Republic of Ireland than in the first post-independence census, in 1926.

Then everything changed. In the 1990s, the Irish economy boomed. After decades of stagnation, employment nearly doubled in just a dozen years. In terms of per capita income, as measured by the (admittedly imperfect) measure of GDP, Ireland has caught up with its peers. By the turn of the century, it had overtaken many, including the UK.

The late catch-up period was intimately linked to Europeanization and globalization, and the interaction between the two. The creation of a single market in Europe in the 1990s was exploited by Ireland like no other country. The greed of globalizing corporations from all over the world seeking to establish themselves in the largest market on the planet was the greatest economic policy success in the history of independent Ireland. Their enormous presence remains today the most important driver of the economy for the creation of wealth, representing up to 90% of goods and services exported outside Ireland.

Then the crash of 2008 happened. The collapse was deeper in Ireland than in most other developed countries. But it was the European-centric export sector that provided the sole engine of growth when those in the domestic economy spat and died. Despite great uncertainty following the country’s bailout by the infamous troika in 2010, foreign companies continue to expand their Irish operations. New ones also continued to arrive, with the globalization of American technology companies at the forefront.

No one has any illusions about why they come and why they stay. They are not in Ireland for the small domestic market of 4.5 million people. They are there for the market of 500 million people that stretches east to the Polish-Ukrainian border.

The centrality of European market access to Irish prosperity is reflected in public opinion and elites. There are very few voices who challenge the overwhelming consensus that EU membership has been good for Ireland and the view that the country’s economic model is based on full integration into the economy of the rest of the EU is close to being universally shared.

The absence of anyone arguing that Ireland should follow Britain out of the EU, if that is what British voters decide, illustrates how important the EU is to Irish prosperity. That Ireland followed Britain to Europe in 1973, because it was believed that ties were so close that we had no other alternative, shows how much the country’s orientation has changed over the four decades.

But despite the widely recognized economic importance of the EU and the abundance of money from Brussels (mainly for farmers) over the decades, attitudes towards Europe cooled at the dawn of the era. austerity. This is almost entirely linked to joining the euro zone.

After the Lehman crash and the start of crisis in 2008, membership of the euro was seen as a protective shield. When people looked north towards Iceland, they saw not only collapsing banks, which Ireland was also facing, but a collapsing krona. Being part of a global currency saved the economy from the additional hit of exchange rate volatility that would have been inevitable if the Old Irish Pound was still legal tender.

But the outbreak of the Greek crisis less than 18 months later marked a turning point, for Ireland as for Europe. Instead of protecting its members, the euro has become the perfect transmission mechanism for contagion. In November 2010, Ireland became the second eurozone country to be bailed out. What happened then generated unprecedented controversy and criticism of the role of European institutions and other member countries.

It must be said that the misfortunes of Ireland were overwhelmingly self-inflicted. A huge housing bubble in the years up to 2008 went unchecked. Pride had set in. The government of the day came to believe that the economy was invulnerable. But none of this is to say that the response to the eurozone crisis was the right one, either for the bloc as a whole or for individual members. The most controversial issue was the role of the European Central Bank (ECB) in bailing out Irish banks.

Elected politicians in Dublin have acted on their own accord by using taxpayers’ money to pay private bank debts, but not in all cases. Two separate Irish governments felt it was worth allowing a small part of the liability to default. The ECB, worried about a new shock to an already fragile European financial system, took a different view. This added about 4 billion euros to the public debt. Whether Frankfurt was right or wrong, having a largely irresponsible entity impose private debts on a sovereign people left a sour taste.

However, these controversies are being pushed aside as the Irish economy has recovered strongly – employment has increased by more since 2012 than in the 70 years after independence. This led public opinion to revert to its former strong support for Europe.

The latest EU-wide Eurobarometer opinion poll showed that we Irish had the third most positive opinion of the union among its 28 members. Only 14% saw it negatively. In a world where voters are angry and often ready to blame first and ask questions later, this turnaround is as remarkable as that of the Irish economy.

Pat R. Madsen