Mail & Guardian, April 17th 2009

BUST BOOM BUST: Thomas Breathnach writes from Ireland on the fall of the Celtic Tiger economy and how faraway hills, even Irish ones, are not always greener.

“What’s the difference between Ireland and Iceland?”

“One letter and six months”

Like in all times of national crisis, be it the Potato Famine, or our failed rugby World Cup exploits we Irish with our indelible sense of humour can never help but make light of matters. So, it comes as no surprise that the world recession become the butt of an odd joke or two as well.

However the above punch line, alluding to Ireland following in the footsteps of Iceland’s recent brush with national bankruptcy, yields an uneasy laughter with any Irish person you tell it to – and I’m no exception.

I’d returned to my native Ireland last December after having a two year love affair with South Africa. Bucking the traditional trend of “Packing for Perth” I was one European who was more than happy to relinquish his native welfare state for the sunny skies of Cape Town and set my heart on buying a house in what is the holy grail for foreign property investors: Tableview.

But in order to fast track my racking up of a decent bond deposit, I decided that a stint back in Ireland to capitalize on the strong Euro/Rand rate would be my best bet. It was just a pity that my return home coincided with the greatest financial catastrophe in the history of our state. My bad.

It was a surreal scenario. Ireland was just becoming comfortable with her new identity as the economic miracle of Europe. Our Celtic Tiger economy had made us one of the wealthiest nations in the world and unshackled the painful memories of hard times in the 1980’s – when even the leprechauns were emigrating.

Now the country is in for another monetary metamorphous – this time an economic meltdown which has seen the government lose more money, and the work force haemorrhage more jobs the than even the sagest of economists would have predicted.

At the vanguard of those job losses is Ireland’s construction industry , once the engine of the boom harbouring 12% of the workforce – that’s 50% above the E.U. average. Construction has crumbled in recent months following overinflated property prices and a credit crunch on the back of a spate of foolhardy banking practices such as the much maligned 100% mortgage. Every day’s news headlines are now saturated with stories of builders and tradesmen suffering mass redundancies in addition to the huge amount of white collar workers associated with the industry. The number of auctioneers, real estate agents and property solicitors also joining the dole queue has risen by up to 600% and even McDonalds restaurants have recently announced the increase in the number of architects in their service staff.

And just when you think the news can’t get any worse, it does. Ireland’s hi-tech industry which made the country the biggest producer of computer software in the world is also under grave threat. American multinational giants like Dell and Intel who had set up production plants here in the mid nineties with the aid of attractive tax breaks are now outsourcing their plants to more cost effective locations such as Poland – where they can afford to pay their average worker 75% less. With a minimum wage of €8.65 an hour, average salaries of €38,000 a year, and a personal net wealth which ranks second only to the Japanese, it seems Ireland has priced herself out of most markets.

The bubble burst has seen 2009’s first quarter job losses amounting to the greatest unemployment leap since records began with the jobless rate now standing at 10.4% up from 4.9% one year previously. What’s more worrisome is that there’s little sign of any slow down with figures expected to exceed 15% by end of year. The country was even cited by South African Minister for Finance Trevor Manual as his example of a fallen economy following his visit to G20 summit in London last week.

Ireland’s crisis amounts to a huge economic strain on its national government (a coalition of the conservative Fianna Fail party and minority Green Party); who are already struggling after bailing out the country’s two largest banks last September with €7bn of tax payers’ money. The bailout has been seen as one of the most monumental decisions ever made by an Irish government and also one of the most controversial as the government only investigated the bank’s business performance after the money was invested. This lack of “due diligence” by the Dept. of Finance has largely outraged the Irish public and with Allied Irish Banks shares down by 99% it’s feared the banks may have to be recapitalized adding to the country’s €15bn budget deficit for 2009.

Public anger that the government squandered too much money during the boom years now seems to be coming back to haunt the Taoiseach, Brian Cowen – a man who earns more than the President of the United States. A recent poll by the Irish Times puts his government at a record low approval rate of just 14% – with most people quoting the government’s inaction to establish policies to decelerate the recession as their primary gripe.

In response,Taoiseach Cowen made his first ever state of the nation address in March to quell any fears about the economy and any doubts about his leadership. The webcast uploaded to the government website has since been criticized by political pundits for not only the generic rhetoric used by the Taoiseach, but more curiously as the government decided not to edit out the Youtube two star rating brandished above our leader’s head. You’d think if there was ever a time for propaganda, it would be now.

As for my endeavours – after a dice with the dole queue I was fortunate enough to finally find a part time position as a public secondary school teacher but public sector salaries have been controversially cut by 8% in February which has prompted nationwide protests and imminent striking. That house in Tableview was starting to look very far away.

An emergency budget revealed in the Dáil this Tuesday saw the government announce further cuts in spending. The included tax hikes, slashed allowances and even reductions in overseas aid to the tune of €100 million prompting harsh criticism from humanitarian organizations. Levy’s on those workers on the minimum wage will now bring their salaries to within the levels of unemployment benefit payments which may entice more people to join the dole queues.

Be that as it may, it’s not all doom and gloom. Although Ireland is jostling with Latvia for the dubious distinction of having the worst economic outlook for 2009, European Central Bank president Jean-Claude Trichet is confident Ireland will recover from this recession with competent leadership. Yet with a government labelled grossly incompetent and a major opposition party looking like somebody forgot to plug them in, there’s a sense that things are to get a whole lot worse for Ireland and me before they’ll get better.

I’m now looking at property in Bellville.