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Relying on the kindness of strangers

Ireland's economic demise from "Celtic Tiger" to a rather more pitiful creature has left it reliant on the international community. 

Last modified: 14 Nov 2010 16:50
Photo by AFP

In November, the wind whips right up Dublin's famous O'Connell Street. It blows off the River Liffey, past the statues and fountains marking important moments and people in Irish history and culture. 

It forces everyone to pull their coats a bit tighter, lift their collars a bit higher and bow their heads a bit lower. On a grey day like today, the weather reflects the mood about the Irish economy.

Further along the river there are shiny new buildings – a reminder of the good times. 

There are the corporate headquarters, the plush hotels and the impressive national conference centre. 

Ireland's economic performance over the past ten years was stellar. From being one of the poorest countries in Europe, Ireland became the envy of many. It even had its own name. Everyone wanted to have their own "Celtic Tiger".

But now there are also buildings where workers have downed tools and the projects have been halted in mid construction; the modern monuments to the current crisis. 

The problem is Ireland's boom was fuelled by the construction industry. When the banks made credit more difficult to get, the industry collapsed and dragged the Irish economy down with it. 

With the banks wobbling, the government stepped in to guarantee their future – and now the taxpayers face a multi-billion dollar bill to bail out the banks that funded the unsustainable growth.

The Irish government is planning an austerity budget. It'll mean $20bn in cuts in public services and a rise in taxes. 

It may convince the international markets that Ireland can repay its debts. If the budget doesn't build confidence, then there will have to be an EU bailout. But from her office in Dublin, Brid O'Brien insists it can't all be all cuts. 

O'Brien represents the Irish National Organisation of the Unemployed. She says: "The Government has to provide money for long-term education and training for the unemployed. That will get people back to work again.

"Some people are being offered the same courses they received five, six years ago when they lost their job. The world and the economy has moved on."

The most common phrase bandied about is that Ireland is the new Greece. It's not.

When Ireland hit the financial crisis, it had a budget surplus. It has enough money in the bank to meet all its commitments until the middle of next year – and its tax regime remains one favourable to inward investment and attracting business. 

Economist Marc Coleman sums it up: "There's not a lot of optimism around, but there’s a lot less pessimism".

He points to important economic indicators which suggest Ireland might just fight its way through it's problems: "Exports are up; industrial productivity is up; unemployment is down for the second month in a row and tax revenues are higher than expected and predicted. 

"We could hit a double dip recession but we’re in danger of talking ourselves into it."

Ireland has had informal talks with the EU about a possible bailout. These have been described as "what if" talks. 

The international financial markets are only interested in buying Irish bonds - essentially lending the country more money, increasing its debt – if they get a return of around 8 per cent.

Realistically, Ireland can't afford that. If the markets won't give the money at decent rates, then the only route open is an IMF EU cash injection.

That's embarrassing and means many of Ireland's economic measures will be imposed externally.

One Irish economist, Morgan Kelly, predicted the current financial crisis, but when things were good and money was being made, no-one listened. 

Proven right, people are now keen to hear what he has to say. He believes there's no chance Ireland will survive on its own.

In a recent article in the Irish Times, Kelly concluded: "From here on, for better or worse, we can only rely on the kindness of strangers."