Five years ago, the European Union and the IMF had to save the Emerald Isle from bankruptcy, and today Ireland is again an example for all of Europe
As Deutsche Welle notes, in 2014 its economic growth rate was 5.2%, already the best in the entire European Union, and in 2015 it accelerated to 7.8%, several times higher than in most EU countries. Moreover, while China's economic dynamics slowed last year, in Ireland they, on the contrary, increased. As a result, the recovered "Celtic tiger" overtook the somewhat out-of-breath "Chinese dragon."
Irish statisticians traditionally take more time to compile macroeconomic data than their colleagues on the mainland, so the official announcement of last year's GDP increase of 7.8% came from Dublin only in mid-March – later than the overall European figures. As a result, this very significant figure was almost lost in the turbulent stream of current world news.
It is significant for at least two reasons. First, because just five and a half years ago, Ireland, where the crisis of 2008 burst the "bubbles" in the overheated real estate market and the bloated banking sector, was on the verge of bankruptcy. In the fall of 2010, it became the second country in the eurozone after Greece to receive emergency multi-billion dollar financial assistance from the "troika" of creditors – the European Union (EU), the European Central Bank (ECB), and the International Monetary Fund (IMF).
The successful recovery of the Irish economy thus confirms the correctness and effectiveness of the program of harsh austerity and reforms that the European stability fund and the IMF insisted on when allocating funds. Following Ireland, various versions of such a program were implemented in Portugal, Spain, and Cyprus. It has not yet yielded the desired result only in Greece.
Second, Ireland from the mid-1990s to the mid-2000s was already one of the EU leaders in terms of economic growth rates, which at that time averaged about 6% per year on the island. In fact, it was then that the once impoverished country, from which mass emigration had taken place for centuries to escape famine, earned the epithet "Celtic tiger" – by analogy with the "Asian tigers," as South Korea, Singapore, Taiwan, and Hong Kong were nicknamed for their rapid economic growth in the second half of the 20th century.
Thus, the current return of Ireland to its previous dynamics shows that the country has an economic structure capable of repeatedly generating high and even super-high (for a developed country) growth rates. At the same time, it indicates the readiness of Irish society to flexibly adapt to changing conditions and quickly agree to necessary reforms.
A vivid example is the decision taken in 2011 at the request of the "troika" of creditors to gradually raise the retirement age from 65 to 68. Society accepted it surprisingly calmly, there was no explosion of indignation at all. "The Irish do not like to sit idly by. They say to themselves: if life expectancy is increasing, then working longer is completely normal," explains the reaction of his compatriots Irish professor of German origin Edgar Morgenroth, who works at the Institute of Economic and Social Research in Dublin (ESRI).
Much more dissatisfaction and even protest demonstrations were caused, for example, by the introduction of charges for water use. But to reduce the devastatingly high budget deficit, most Irish agreed to even more painful measures: cuts in public sector salaries, reductions in unemployment and child benefits, and an increase in value added tax. "Such flexibility was extremely important in turning the situation around," emphasizes Professor Morgenroth.
However, the relative improvement in public finances achieved through austerity in 2011-2013 was only a prerequisite for the resumption of GDP growth. What ensured it was a "well-functioning economic model that promotes entrepreneurship even before the crisis," says ESRI expert Kieran McQuinn. "Ireland is a very business-friendly country," confirms Ralf Lissek, head of the German-Irish Chamber of Commerce in Dublin.
Once a classic agricultural country, known mainly for butter, beer, and whiskey, Ireland after joining the European Union in 1973 and a large-scale reform of the education system managed to move onto an industrial track, focusing on knowledge-intensive industries and high technology. Thus, today the largest sector of the Irish economy, providing nearly 60% of exports, is the pharmaceutical industry, and one of the most important employers on the island has become the IT industry, primarily American.
Computer giant Intel produces microchips in Ireland, and the European headquarters of Microsoft, Facebook, Google, Twitter, Linkedin are located here. Apple has already created about 5,000 jobs on the island, and by 2017 about a thousand more will be added.
The competitive advantages of the Emerald Isle are not only the very low corporate tax rate of 12.5%, which Dublin managed to defend in negotiations with the "troika" of creditors. The favorable investment climate is also facilitated by excellent transport infrastructure, created largely with financial support from the EU, a large number of qualified personnel, a low level of corruption, and an efficient state apparatus. And also the fact that Ireland is the only country in the eurozone where English is an official language.
Whether the "Celtic tiger" will again overtake the "Chinese dragon" in 2016 is not yet clear. According to forecasts, the GDP of the Emerald Isle could increase by approximately 5%. But this will certainly mean that Ireland will become the leader of the entire European Union in terms of economic growth for the third year in a row.