The Celtic Retreat

The Celtic Tiger was the longest period of economic growth ever achieved in Ireland. The country went from having one of the highest rates of unemployment in Europe to almost full employment. Net outward emigration was turned into net inward migration, for the first time in its modern history people from other countries came here looking for work. Credit became available to all and people loaded themselves with debt, with the belief it could be paid back.

People where convinced to get on the property ladder and buy their own property. Banks, estate agents, the media and politicians where all complicit in encouraging the population, that now was the time to buy a house. Despite the rapid acceleration of house prices at the turn of the century the demand for housing continued increasing until it hit its peak in 2006.

Public spending also greatly increased during the Celtic Tiger. Both welfare recipients and public servants benefited from wage increases well above the rate of inflation. Spending on Infrastructure also increased with the country benefiting from improvements in roads, telecommunications and public transport.

The Celtic Tiger was built on strong foundations, but by 2007 these foundations were cracking and by September 2008 these foundations would fall apart, leaving behind an exposed and shattered Ireland in its wake.

This blog will attempt to identify those groups, people and institutions most effected by the Celtic Retreat.

Ireland back from the brink - reasons to be positive

Over the past number of years Ireland’s reputation at home and abroad has taken a battering. Ireland suffered three successive years of negative economic growth during the years 2008 to 2010. Things are now beginning to improve, preliminary results from the Central Statistics Office (CSO) indicate that GDP increased by 0.7% for 2011.

Many multinational companies are now looking to invest in Ireland again. In 2011 new investment into Ireland increased by 30% and 13,000 new jobs were created by foreign direct investment (FDI) companies source (PricewaterhouseCoopers)

  Why Ireland is attractive location to invest  in

•    12.5% Corporate tax rate

•    Ireland has one of the youngest workforces in Europe

•    3rd lowest tax rate in the EU

•    48% of 25-34 years olds have a third level qualification

•    The only English speaking Euro-Zone member

•    33% of the population are under the age of 25

Ireland has become a hub for many FDI Companies

•    3 of the worlds top 5 gaming companies are located in Ireland

•    50% of the world’s top banks are operating here

•    9 of the top 10 pharmaceutical companies are in Ireland

Many of the job opportunities over the next few years will be primarily in exporting companies. While the domestic economy in Ireland is struggling the export sector is flourishing, and this is no surprise when you consider that Ireland is the 2nd largest exporter of medical devices and is one of the top 5 exporters of software in the world.

The Youth of Ireland

The economic crisis has hit the youth of Ireland like a tsunami. During the Celtic Tiger young people had an abundance of options. Third level education was affordable with low registration fees, there were plenty of apprenticeships in many sectors in part due to the booming construction and motor sectors. The retail industry was also performing well providing both full time and part time work for many young people.

Ireland today is like a desert for the youth of Ireland with thousands trying to compete for the mirage of jobs that the Government like to think exist. The affluent days of the Celtic Tiger have being replaced with austerity, with negative consequences for all. Third level registration fees have doubled, the amount of apprenticeships has dramatically declined due to the collapse of the construction sector and many retail jobs have disappeared because of the depressed state of the domestic economy.

The employment prospects for the under 25’s in Ireland is dim to say the least.  The youth unemployment rate in Ireland is close to 30%. The under 25’s find it difficult to compete for jobs because of their lack of work experience compared to older workers with a long employment history. A lot of workers approaching retirement are now working longer because their pension pots have being rapidly reduced. This is making it even more difficult for young people to find employment.   

The government both past and present has unfairly targeted young people when looking for cuts. The dole has being reduced to €150 a week for under 25’s and a €100 a week for under 20’s. Those who are under 25 also have their dole means tested which results in lower payments for many of those in receipt of unemployment assistance.

Ireland is once again witnessing a flight of young people from the country. This may have worked in the past, but with a growing grey population and an increasing retirement bill, young people are needed to pay the pensions bill of the future. 

It is time that people in Ireland realised that young people are the solution to this economic crisis and not part of the problem like many in Ireland believe.  

Fianna Fail

Once Ireland’s largest and most successful political party Fianna Fail were trounced at the last general election.  Going into the 2011 general election Fianna Fail had 70 seats out of a total of 166 in Dail Eireann, this was reduced to 20 after the election.

For almost seventy years Fianna Fail was Ireland’s largest political party. Every past Fianna Fail leader  became Taoiseach at some stage in their career.  The soldiers of destiny had a vast appeal to many in Ireland. They were seen as the true Republican Party and the party of the people.

Fianna Fail in many ways build modern Ireland. Éamon de Valera established Irelands constitution, Sean Lemass industrialised the country and Ray MacSharry pushed through the necessary budget cutbacks which led Ireland to growth in the 1990’s.

The month of September 2008 was the beginning of the end for a once proud party. The bank guarantee was rushed into without any consultation.This led to the state having to pick up the tab for all of the banks debts.

For eleven years Ireland ran a budget surplus and Fianna Fail were able to introduce popular budgets. This all changed in 2008 when the economy imploded and Ireland’s finances spun out of control.  

From 2008 to 2011 Fianna Fail had to introduce some of the toughest budget cutbacks in decades.  For a population reeling from cutbacks and job losses Fianna Fail was identified as the party who blew the boom.  

The ultimate death nail in the coffin of Fianna Fail was the arrival of the IMF in November 2010. Fianna Fail was forced to effectively sign away Ireland economic sovereignty because of the disastrous way they ran the economy.  

Fianna Fail has a long history of corruption and cronyism and political opportunism which have being responsible for wrecking Irelands economy many times. In the past Fianna Fail escaped any blame be getting out of Government before having to introduce tough budget measures.But from 2008 to 2011 they had to introduce budget cutbacks due to their own mismanagement and this was meet with anger by the people of Ireland.

The soldiers of destiny have a bleak future many people have rightly identified them as the main culprits in Irelands economic decline. Fianna Fail politicians both past and present still blame everyone else but themselves for Irelands collapse. 

Despite having destroyed Ireland for a generation many of the ministers which were in cabinet over the past three years get gold plated pensions and payoffs. While rest of the country is suffering from job losses and austerity, ex Fianna Fail minister are at home counting their money.

Education

The education system in Ireland was underfunded even during the Celtic Tiger. Ireland had one of the lowest levels of spending on education as a percentage of GDP among the OECD economies. Schools have always being required to raise additional funding, because the amount of money provided by the department of education has not been enough to meet the overall running of a school. School walks, coffee mornings and voluntary contributions from students parents is a feature of every Irish child’s education.

The subsequent demise of the Celtic Tiger which resulted in the largest contraction in the Irish economy in living memory has being devastating for the funding of an already underfunded system.  Special needs assistants and English language assistants have been made redundant, a policy which will have devastating consequences in the future.There has being an embargo placed on future recruits until 2014. Class sizes have increased making it even more difficult for under pressure teachers to deliver a quality education to their students

The next budget will witness even more reductions in teaching numbers, with teaching numbers to be reduced by between 1500 and 2000. Many schools have also seen their capital budgets slashed, making it impossible to build new facilities. 

In some counties the rental bill of prefabs is some €3 million a year. It would be cheaper when spread over a number of years to actually build new school buildings. But the department of education continues to waste money on renting prefabs.  Teaching children in dilapidating prefabs is a sad indictment of our so called world class education system

The third level sector has also being hit hard with an increase in student numbers but with a reduction in funding from the government. One proposal put forward by education chiefs is to cap the number of students entering third level.  This is a stupid approach focused entirely on short term gain. 

If the so called knowledge economy is to succeed in Ireland, it will require not only an overhaul of how education is delivered but an increase in funding for schools and colleges. A failure to do so could in the not so distant future see a reduction in the amount of foreign direct investment coming into the country. 

At a time when many other countries including emerging economies are investing heavily in their education systems it is imperative that Ireland keeps investing in education. Our future prosperity depends on the quality of our education system today.

While many government departments will see a reduction in the amount of capital provided to them by the government over the next few years, it is vitally important that the department of education’s budget is spared.  

The Banks

Once regarded as pillars of the Irish economy, the banks today are considered as the prime suspects in destroying the economy. It has been a dramatic decline from pre 2008, when leading bank officials were being interviewed constantly by the media. Figures such as Sean Fitzpatrick, David Drumm, Michael Fingelton, and Dan McLaughlin were regarded as economic geniuses and their every word taken as gospel.

In September 2008 the Irish Government made the worst economic decision since the foundation of the state.  The decision to introduce a blanket guarantee left the people of Ireland on the hook for any losses the banks may occur. Rather than introduce a limited guarantee covering future loans, the government introduced a whole scale guarantee for which Ireland will fell the consequences for decades.

  

The star child of the Celtic Tiger Anglo Irish Bank is to be wound down and put out of its misery. This institution alone has cost the Irish taxpayer close to €30 billion. From the height of a share price close to €18 in May 2007 Anglo Irish is now worthless. Its uncompleted decaying building in the Dublin docklands is a symbol of its excessive greed and the consequences of where such greed can lead to.  

Share Price Chart

Irish Nationwide is also to be wound up having cost up to 7 billion to recapitalise. Their former chief executive Michael Fingelton still refuses to hand back his one million Euro bonus he received in 2009. It has also being revealed in the past year that Fingelton has a pension pot in excess of 20 million Euros. This must be extremely upsetting for the shareholders who lost a small fortune and possibly their own retirement security net, in part thanks to Fingeltons miss management of Irish Nationwide. 

Allied Irish Bank has so far cost the nation of Ireland up to €19 billion. Its attempt to follow Anglos strategy of betting on the property market ultimately ended in tears.  The bank is to scrap half its workforce due to the downturn and close a significant number of branches. 

Bank of Ireland wasn’t as aggressive in its pursuit of the property market as the other major Irish Banks, but it was still left exposed due to its reliance on the Irish property market. The Irish state has so far invested around 7 billion Euros and has a 36% stake in the company.

Between 2008 and 2010 when the banks were struggling to survive, they still managed to pay bonuses of €44.7 million. The Chief Executive Officer at Bank of Ireland admitted to the Dail in January this year that his company provided ‘erroneous information’ in relation to performance relation bonuses. In the past few months of 2008 Anglo Irish Bank employees received €20 million. 

It’s ironic that the banks so long the cheer leaders of the free market system are now almost all completely controlled by the state. The Irish people will be left with the bill for their excess; each of Ireland’s citizens will owe €15,000 thanks to the banks reckless pursuits of short term profits. 

During the Celtic Tiger the banking sector in Ireland became one of the most competitive in Europe. Ireland witnessed an influx of foreign banks entering the market. The past few years however has seen a number of these banks withdraw from Ireland. In the coming years the banking sector will be dominated by BOI and AIB and this will mean increased prices on a range of services. 

The bankers in Ireland are now being held in the same contempt as the landlords of the 19^th Century. While the people of Ireland are exposed to harsh austerity measures in part thanks to the banks, not one single banker has being sent to jail. This is a scenario which outrages everyone in Ireland.