Hamish McRae: Don't give up on the Celtic Tiger just yet

It is possible Ireland will seek support from the EU, but it will probably scramble through

Share
Related Topics

It will be a close-run thing but Ireland should make it. The scale of the support the country has had to marshal to cover its banking system's debts will strain its finances but it should grow solidly through the next phase of the global economic cycle, cover its debts and give a rising standard of living to its people.

The scale of the bad debts of the Irish banks, in particular those of Anglo-Irish Bank, are huge and unlike in the UK, it is unlikely the government will be able to claw back most of that debt by selling bank stock back to the public. (Currently the UK taxpayer is roughly square on its bank investments.) But the calculation that this pushes the Irish budget deficit from a dreadful 12 per cent of GDP up to an unthinkable 32 per cent is misleading.

Even in a worst case the additional debts will be spread over many years. Ireland has so far been successful at finding buyers for its national debt and has large cash reserves. It is true that gross national debt at the end of this year will be 100 per cent of GDP. But if you allow for the cash balances and national pension fund assets, net debt will be about 70 per cent of GDP, not much higher than that of the UK at 62 per cent. Looking ahead, Irish debts will be towards the top end of the global scale. But debt will probably be lower than that of Italy and certainly lower Japan's. In any case debts were close to 100 per cent of GDP in the early 1990s, when Ireland's long economic boom began.

So while it is possible that Ireland may have to seek support from the European Union and it may need to reschedule its debts, the balance of probability is that it will scramble through. The key will be growth. The immediate signs are mixed, for after a strong first quarter, the economy did fall back in the second. But domestic consumption is rising at last, with car sales double the level of the trough of September a year ago; exports are up; and new orders are now only about 7 per cent below the peak of 2007, a much better performance than the rest of the eurozone.

So the core economy is on the mend. The turnabout is achingly slow and maintaining political support for a policy that punishes ordinary people for past speculative excess will be hard to sustain. But compared with the situation of Ireland in the early 1990s, or indeed in the 1960s, when the country had a GDP per head of only two-thirds of the UK, the potential for growth is quite positive. The scars of the property crash will remain for many years but the core qualities that created the "Celtic Tiger" are still there – the skilled workforce, the attractive corporate tax rates and so on – so as global growth picks up, the Irish economy will benefit alongside the rest of us.

React Now

iJobs Job Widget
iJobs General

CRM Data Analyst – Part time – Permanent – Surrey – Circa £28,000 pro rata

£15000 - £16800 Per Annum Plus excellent benefits: Clearwater People Solutions...

Mechanical Design Engineer

competitive: Progressive Recruitment: A key client in the East Midlands are re...

Year 5/6 Teacher

£21000 - £31000 per day: Randstad Education Chelmsford: The JobWe are looking ...

Teacher

£90 - £120 per day: Randstad Education Chelmsford: The Job...Due to continued ...

Day In a Page

Read Next
 

The daily catch-up: fathers looking after children, World Cup questions and Nostradamus

John Rentoul
 

Letter from the Political Editor: Phone and data laws to be passed in haste

Andrew Grice
A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice